MO-Annual Report 21(w) x 26.2(h) cm-F.cdr - Motilal Oswal

NOTICEd. Personal Accident Insurance: Personal Accident Insurance of an amount, the annual premium of which doesnot exceed R 10,000.e. The Company shall provide a car with a driver and a telephone at the residence of Mr. Raamdeo Agrawal.Provision of car for use in Company’s business and telephone at residence will not be considered asperquisites.III. Other Benefits:i) Benefits under loan and other schemes in accordance with the practices, rules and regulations in force inthe Company from time to time.ii) Such other benefits and amenities as may be provided by the Company to other senior officers from time totime.The total remuneration proposed to be paid to Mr. Raamdeo Agrawal will not exceed in any case 5% of thenet profits of the Company calculated as per sections 349 and 350 of the Companies Act, 1956 in case ofindividual and does not exceed more than 10% of the net profits of the Company calculated as above for allthe working Directors taken together.Mr. Raamdeo Agrawal shall be entitled to reimbursement of actual expenses including travelling, hotel bills,conveyance, entertainment, miscellaneous expenses and incidentals incurred by him on behalf of and forthe business of the Company.IV. Minimum Remuneration:Notwithstanding absence or inadequacy of profits in any year during the tenure of Mr. Raamdeo Agrawal, he shallbe paid above remuneration as a minimum remuneration subject to limits prescribed under the Companies Act,1956.FURTHER RESOLVED that where in any Financial Year during the currency of the tenure of the Joint ManagingDirector, the Company has no profits or its profits are inadequate, the Company may pay to the Joint ManagingDirector the above remuneration as the minimum remuneration by way of salary, perquisites and other allowancesand benefits as specified above subject to receipt of the requisite approvals, if any.FURTHER RESOLVED that the Board of Directors of the Company be and is hereby authorised to modify / reviseremuneration of Mr. Raamdeo Agrawal subject to overall ceiling prescribed in the Act, as amended from time totime, and as may be acceptable to Mr. Raamdeo Agrawal.FURTHER RESOLVED that Mr. Motilal Oswal, Chairman & Managing Director, be and is hereby authorised to doall such acts, matters, deeds and things as may be necessary to implement this resolution.”8) To consider and, if thought fit, to pass, with or without modification(s), the following as an OrdinaryResolution: -Appointment of Mr. Vivek Paranjpe as a Director of the Company“RESOLVED that in accordance with the applicable provisions of the Companies Act, 1956 and the Articles ofAssociation of the Company, Mr. Vivek Paranjpe be appointed as a Director of the Company.”9) To consider and, if thought fit, to pass, with or without modification(s), the following as a Special Resolution:-“RESOLVED that pursuant to the provisions of Section 81(1A) and all other applicable provisions, if any, of theCompanies Act, 1956 (including any statutory modifications or re-enactment thereof for the time being in force)and in accordance with the provisions of the Memorandum and Articles of Association of the Company, the ListingAgreement entered into between the Company and the Stock Exchanges, Securities & Exchange Board of India (Issueof Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as the “SEBI (ICDR) Regulations”)and the other guidelines and clarifications issued by the Securities and Exchange Board of India (“SEBI”) and subjectto such other approvals, permissions, consents and sanctions of such other authorities, as may be necessary andsubject to such conditions and modifications as may be prescribed or imposed by any of them while granting suchapprovals, permissions, consents and sanctions and which may be agreed to by the Board of Directors of the Company(hereinafter referred to as “the Board” which term shall be deemed to include any Committee which the Board mayMOTILAL OSWAL FINANCIAL SERVICES LIMITED 3

NOTICEhave constituted or hereinafter constitute to exercise the powers conferred by this Resolution) the consent of theMembers of the Company be and is hereby accorded to the Board to create, offer, issue and allot 700,242 (SevenLac Two Hundred Forty Two) Equity Shares of R 1 each at a premium of R 130.37 per share (hereinafter referred toas the Equity Share / Shares) aggregating to R 131.37 per share (being the price determined in accordance withthe SEBI (ICDR) Regulations on the Relevant Date) to the following persons on a preferential basis in discharge ofthe purchase consideration for the acquisition of 62,500 equity shares of R 10 each held by them in Motilal OswalInvestment Advisors Private Limited and on the other terms and conditions specified in the SEBI (ICDR) Regulations,and on such other terms and conditions and in such manner as the Board may think fit, without offering the same tothe persons who at the date of offer may or may not be the members of the Company:-S. No. Name of the persons to whom it is proposed to issue the shares No. of Equity Shares of R 1 each1) Mr. Ashutosh Maheshvari 233,4212) Ms. Shefali Mehndroo 116,6883) Mr. Sudhir Dash 112,0394) Mr. Subodh Gupta 93,3625) Mr. Mufaddal Cementwala 37,3546) Mr. R. Anand 34,0827) Mr. Suraj Warrier 34,0828) Mr. Dattatray Pandit 8,4039) Ms. Nisha Shah 8,40310) Mr. Puneet Kochar 11,20411) Mr. Ranga Prasad 11,204TOTAL 700,242FURTHER RESOLVED that:i) the Equity Shares to be so issued and allotted shall be subject to the provisions of the Memorandum and Articlesof Association of the Company;ii) the Equity Shares to be so issued and allotted shall rank pari passu inter se, with the existing Equity Shares ofthe Company in all respects including as to dividend;iii) the ‘Relevant Date’ for the preferential issue, as per the SEBI (ICDR) Regulations, for the determination ofapplicable price for the issue of the above mentioned Shares is 21st June, 2011.FURTHER RESOLVED that for the purpose of giving effect to this Resolution, the Board be and is hereby authorisedto do all such acts, deeds, matters and things and resolve any doubts or questions that may arise in the issue andallotment of fresh Equity Shares and to effect any modification(s) to the foregoing (including any modification to theterms of the issue) in the best interests of the Company and its Shareholders and to execute all such writing(s) andinstrument(s) as the Board may in its absolute discretion deem necessary or desirable.FURTHER RESOLVED that the Board be and is hereby authorised to delegate all or any of the powers hereinconferred to any Committee of Directors of the Company with power to the said Committee to sub-delegate its powersto any of its Members to give effect to the aforesaid Resolution.”By Order of the BoardMOTILAL OSWAL FINANCIAL SERVICES LIMITEDMumbai, 22nd June, 2011E-mail: investors@motilaloswal.comSamrat SanyalCompany Secretary & Compliance Officer4NOTICE - 6TH ANNUAL GENERAL MEETING

NOTICENotes:-i) An Explanatory Statement in respect of the above Special Businesses as required under section 173(2) of theCompanies Act, 1956 is annexed hereto.ii) A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND ANDVOTE INSTEAD OF HIMSELF AND A PROXY NEED NOT BE A MEMBER.iii) THE INSTRUMENT APPOINTING A PROXY MUST BE DEPOSITED WITH THE COMPANY AT ITS REGISTERED OFFICE NOTLESS THAN 48 HOURS BEFORE THE TIME FOR HOLDING THE MEETING.iv) The Company’s Registrar and Transfer Agents for its Share Registry Work (Physical and Electronic) are Link IntimeIndia Private Limited having their office at C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West),Mumbai - 400 078.v) The Register of Members and Transfer books of the Company shall remain closed from 13th July, 2011 to 21st July,2011 (both days inclusive).vi) The dividend, if declared at the Annual General Meeting, will be paid between 25th July, 2011 to 10th August, 2011to those persons or their mandates:-a) whose names appear as Beneficial Owners as at the end of the business hours on 12th July, 2011 in the listof Beneficial Owners furnished by National Securities Depository Limited and Central Depository Services (India)Limited in respect of the shares held in electronic form; andb) whose names appear as Members in the Register of Members of the Company after giving effect to valid sharetransfers in physical form lodged with the Company / its Registrar & Share Transfer Agent on or before 12th July,2011.vii) Pursuant to the provisions of section 205A of the Companies Act, 1956 no amount is due for transfer to the InvestorEducation and Protection Fund.viii) Members can avail of the facility of nomination in respect of the Equity Shares held by them in physical form pursuantto the provisions of section 109A of the Companies Act, 1956. Members desiring to avail of this facility may sendtheir nomination in the prescribed Form No. 2B duly filled in to the Registrar & Share Transfer Agent.ix) Members holding the Equity Shares in electronic form may kindly note that their Bank Account details as furnished bytheir Depositories to the Company will be printed on their Dividend Warrants as per the applicable regulations of theDepositories and the Company will not entertain any direct request from such shareholders for deletion of / change insuch Bank details. Further, instructions, if any, already given by them in respect of the Equity Shares held in physicalform will not be automatically applicable to Equity Shares held in the electronic mode.x) Members are requested to:a. intimate to the Company’s Registrar and Transfer Agents, changes, if any, in their registered addresses at an earlydate, in case of shares held in physical form;b. intimate to the respective Depository Participants, changes, if any, in their registered addresses at an early date,in case of shares held in electronic mode; andc. quote their folio numbers / Client ID / DP ID in all correspondence.xi) Members holding the Equity Shares under multiple folios in the identical order of names are requested to consolidatetheir holdings into one folio.xii) The information in respect of Mr. Motilal Oswal and Mr. Vivek Paranjpe (the Directors being re-appointed in theMeeting) forms part of the Explanatory Statement annexed to this Notice.xiii) The Consolidated Financial Statements of the Company and its subsidiaries prepared in accordance with ‘AccountingStandard - 21’ prescribed by The Institute of Chartered Accountants of India, form part of the Annual Report andthe Accounts. The Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of thesubsidiaries have not been attached with the Balance Sheet of the Company as per the general exemption providedunder Section 212(8) of the Companies Act, 1956 by the Ministry of Corporate Affairs, issued vide General CircularNo. 2/2011 dated 8th February, 2011.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 5

ANNEXURE TO THE NOTICEiv) Proposed time within which the allotment shall be completeThe allotment of the Equity Shares being issued on preferential basis is proposed to be made within fifteen daysfrom the date of passing of the Resolution by the Members provided that where the allotment on preferential basisis pending on account of pendency of any approval of such allotment by any regulatory authority or the CentralGovernment, the allotment shall be completed within 15 days from the date of such approval.v) Identity of the proposed allottees and the percentage of post preferential issued capital that may be heldby themS.No.Name of the proposed allotteesCategoryNo. of Shares to be held after theallotment of shares on a preferential basis% of the postpreferential capitali) Mr. Ashutosh Maheshvari Public 891255 0.61ii) Ms. Shefali Mehndroo Public 449986 0.31iii) Mr. Sudhir Dash Public 433844 0.30iv) Mr. Subodh Gupta Public 367985 0.25v) Mr. Mufaddal Cementwala Public 146124 0.10vi) Mr. R. Anand Public 77242 0.05vii) Mr. Suraj Warrier Public 76877 0.05viii) Mr. Dattatray Pandit Public 37470 0.03ix) Ms. Nisha Shah Public 35655 0.02x) Mr. Puneet Kochar Public 30893 0.02xi) Mr. Ranga Prasad Public 30893 0.02There would be no change in the control of the Company consequent to the preferential issue.Auditors’ CertificateCertificate issued by M/s. Haribhakti & Co., Chartered Accountants, Statutory Auditors of the Company will be available forinspection at the Registered Office of the Company during 2.00 p.m. and 5.00 p.m. upto the date of the Annual GeneralMeeting and will be laid before the Meeting.Undertaking by the CompanyThe Company hereby undertakes that it shall re-compute the price of the shares in terms of the provision of theseregulations where it is required to do so.The Company also undertakes that if the amount payable on account of the re-computation of price is not paid withinthe time stipulated in these regulations, the shares shall continue to be locked-in till the time such amount is paid by theallottees.The Resolution at Item No. 9 is proposed as a Special Resolution.The Board recommends the passing of the Resolution at Item No. 9 as a Special Resolution.None of the Directors of the Company has any particular interest or concern in this item of business.By Order of the BoardMOTILAL OSWAL FINANCIAL SERVICES LIMITEDMumbai, 22nd June, 2011E-mail: investors@motilaloswal.comSamrat SanyalCompany Secretary & Compliance Officer10NOTICE - 6TH ANNUAL GENERAL MEETING

MOTILAL OSWAL FINANCIAL SERVICES LIMITEDRegistered Office: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai - 400 064Attendance SlipPlease complete this Attendance Slip and hand it over at the entrance of the Meeting Hall.Folio No. / DP ID & Client ID No.:No. of Shares held :Name & Address of the ShareholderI hereby record my presence at the 6th ANNUAL GENERAL MEETING of MOTILAL OSWAL FINANCIAL SERVICES LIMITED at“Rama Watumull Auditorium, K. C. College”, 124, Dinshaw Wachha Road, Churchgate, Mumbai - 400 020, on Thursday,21st July, 2011 at 4.00 p.m.Name(s) of the Shareholder(s) / Proxy (IN BLOCK CAPITALS)Signature(s) of the Shareholder(s) or ProxyNOTE: No duplicate Attendance Slip will be issued at the Meeting Hall. You are requested to bring your copy of the AnnualReport to the Meeting.Please tear hereMOTILAL OSWAL FINANCIAL SERVICES LIMITEDRegistered Office: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai - 400 064Proxy Form6th Annual General MeetingFolio No. / DP ID & Client ID No.:No. of Shares held :I/Weofbeing amember/members of MOTILAL OSWAL FINANCIAL SERVICES LIMITED hereby appointofor failing himofas my/our Proxy to attend and vote for me/us and on my/our behalf at the 6th Annual General Meeting of the Companyto be held at “Rama Watumull Auditorium, K. C. College”, 124, Dinshaw Wachha Road, Churchgate, Mumbai - 400 020,on Thursday, 21st July, 2011 at 4.00 p.m. and at any adjournment thereof.Signed this day of 2011.RevenueStampSigned by the saidNOTE: The Proxy form duly completed must be returned so as to reach the Registered Office of the Company not less than48 hours before the time for holding the aforesaid Meeting. The form should be signed across the stamp as per specimensignature recorded with the Company.

It’s all about Knowledge.If you know that there’s a pitfall a few steps ahead, you’ve as good asbuilt a bridge over it. If you know that you are going to hit a roadblock,you’ve already circumvented it. Knowing is everything.It’s your peek into seeing the future. It’s your map out of a labyrinth.Most importantly, it’s money.But knowledge is much larger than what books can fit into themselves.It’s also things that can’t be written and learnt by rote. Like observation,experience and sensitivity.Everybody at Motilal Oswal learns to put ‘Knowledge First’ from day one.With over 1500 employees and more than 24 years in the business ofinvesting; that’s a lot of observations, experience and in-depth study ofhow to make investments grow.Since diversifying from broking to various other financial services likeWealth Management, Investment Banking, Private Equity and AssetManagement; our knowledge has only increased.It’s this wealth of knowledge that helps us create wealth for our clientsand partners. After all, the more knowledge we have, the richer we get.

BOARD OF DIRECTORSMr. Motilal OswalChairman & Managing DirectorChief Executive OfficerMr. Raamdeo AgrawalJoint Managing DirectorMr. Navin AgarwalDirectorMr. Ramesh AgarwalIndependent DirectorMr. Balkumar AgarwalIndependent DirectorMr. Madhav BhatkulyIndependent DirectorMr. Vivek ParanjpeIndependent DirectorChief Financial OfficerMr. Sameer KamathCompany Secretary and Compliance OfficerMr. Samrat SanyalBankersCitibank N.A.HDFC BankStandard Chartered BankIDBI BankState Bank of IndiaHSBCICICI BankYes BankAuditorsM/s Haribhakti & Co., Chartered AccountantsRegistered OfficePalm Spring Centre, 2nd Floor,Palm Court Complex, New Link Road,Malad (West), Mumbai- 400 064.Corporate OfficeHoechst House, 3rd Floor,Nariman Point, Mumbai-400 021.FINANCIAL STATEMENT 2010 - 2011

CONTENTSMESSAGE FROM THE CHAIRMAN5PERFORMANCE AT A GLANCE7BUSINESS SNAPSHOT8THE YEAR THAT WAS9KEY PEOPLE11DIRECTORS REPORT13MANAGEMENT DISCUSSION AND ANALYSIS22CORPORATE GOVERNANCE37ACCOUNTS53MOTILAL OSWAL FINANCIAL SERVICES LIMITED 3

Why does the salmon start to go against the flow, swim upriver, at times evenleap over a waterfall; when every other fish are swimming towards the sea?Because it knows that the best place for its young to survive, is near thesource of the river.

MESSAGE FROM CHAIRMANDear Shareholders,I write to you at the close of this roller-coaster year. The growth rate of the Indianeconomy saw some headwinds with rising input costs and high interest rates. TheIndian markets delivered a moderate performance in FY11, as compared to the highreturns last year. Although strong FII inflows boosted the markets, the DIIs remained netsellers. Average daily market volumes were `1.33 lakh crores in FY11, up 40% YoY.However, this was attributable to the disproportionate growth in the low-yield optionssegment of the market, while the high-yield cash segment saw year on year decline.Lack of a sustained, directional trend in the markets resulted in muted retailparticipation, which saw some traction only during a few PSU public issues. Thus, thegrowth in overall market volumes did not result in a corresponding growth in the overallbrokerage revenue pool.On a consolidated basis, our revenues declined 7% to `600.4 crores in FY11, andreported PAT declined 20% to `137.1 crores. Broking-related revenues fell 5% to`433.4 crores this year owing to the decline in the cash volumes in the market. Thestrategy of diversifying across business segments saw ~30% revenues beingcontributed by non-broking businesses. Fund based income grew 14% to `73.8 croreswith an increase in the loan book. Asset management fees increased 7% to `42.7crores with the launch of the new mutual funds, which saw active investor interest.Investment banking fees saw a 39% decline at `39.8 crores due to revenue booking of some large deals in advanced stage of execution gettingpostponed due to delays in obtaining certain regulatory approvals. FY11 EBITDA and Net Profit margins, at 38% and 23% respectively, were inline with the long term trend. Our Pan-India expansion is on track with total customers increasing to 709,041 and retail distribution at 1,644outlets across 611 cities.We remain a focused player in the capital markets space and continue to invest into building a strong franchise in this space. True to ourphilosophy of Knowledge First, we introduced several innovative products during the year, many of which were India's First. We continue toexpand our client base and be a financial intermediary of choice for our clients. The approach of utilizing capital judiciously and a variable coststructure was successful in maintaining a healthy balance sheet and consistent profit margins in challenging times. A strong, unleveragedbalance sheet with a net worth of `1,060 crores and a time tested business model, gives us the headroom to capture all viable opportunities inthis space.Our efforts to create a superior, value-driven business were recognized through various industry accolades this year:Motilal Oswal was adjudged the 'Best Performing Equity Broker' at the CNBC TV18 Financial Advisors Awards, 2010.We won 4 awards at the ET-Now Starmine Analyst Awards 2010-11, placing us amongst the Top 3 award winning brokersMotilal Oswal was also ranked No. 2 by AsiaMoney Brokers Poll 2010 in the Best Local Brokerage CategoryThe M&A transaction of Shree Renuka Sugars (Brazil's Equipav SA acquisition) advised by our investment banking business won the “AsiaPacific Cross-Border Deal of the Year” award and our CEO won the “India M&A Investment Banker” award at the Asia Pacific M&A AtlasAwards, 2010We bagged the QualTech Prize for Improvement 2010 in Services for a DMAIC project on reducing account opening turnaround timeOur M50 ETF, bagged the 'Most Innovative Fund of the Year' award at the CNBC TV18 CRISIL Mutual Funds Awards 2011India's growth story remains intact and its GDP is expected to reach US$5 trillion by 2020. With the consequent growth in discretionary incomeand savings pool, there is a favourable opportunity for the financial intermediation space over the medium to long term. Our focus remains strongin our value-driven research approach, increasing distribution reach across India and growing our related business segments, together withmaintaining a risk-free balance sheet. Due to these factors, we firmly believe that we are favourably poised to tap the resultant opportunities.I would like to express my gratitude to our Board of Directors for their support and guidance. I am also grateful to all our stakeholders – customers,business associates, employees, vendors and shareholders, who have reposed their trust in us and given us constant support.With best wishes,Sincerely,Motilal OswalChairman and Managing DirectorMumbai, 20 June, 2011MOTILAL OSWAL FINANCIAL SERVICES LIMITED 5

The giant anteater raids termite and ant colonies for food. But why does it nevereat up the entire colony and instead stops just short of that? Because it knowsthat in a very short time the ants and termites will rebuild and repopulate theircolonies. This means, it ends up having a sustainable food supply.

PERFORMANCE AT A GL ANCEConsolidated Revenues `Cr (CAGR 13%)Revenue Composition %3687004666456001%2%3%7%87%2%4%5%9%80%2%5%14%10%70%3%6%10%10%71%2%7%12%7%72%FY07 FY08 FY09 FY10 FY11EBITDA `Cr (CAGR 14%); EBITDA Margin %37%13743%38% 39%38%270181277230FY07 FY08 FY09 FY10 FY11Broking & related IB Fees Funds Based AMC Fees OthersFigures may not always sum to 100% due to roundingProfit After Tax `Cr (CAGR 15%); PAT Margin %26%21%22%20%23%1561701377893FY07 FY08 FY09 FY10 FY11FY07 FY08 FY09 FY10 FY11Net Worth `Cr; RONW (Average) %Assets under Management/Advice/Distribution `Cr35%33330%70979412%94620%1,06014%2,3551,0115507949626194772,6622,058 9667149822,9896077501,258374FY07 FY08 FY09 FY10 FY11FY08 FY09 FY10 FY11MF (ETF) PMS PE Third Party MF DistributionNumber of Locations and Cities548 568611Total Number of Clients3771,2004321,4301,2891,3971,644461,699541,372621,215709,041268,916FY07 FY08 FY09 FY10 FY11FY07 FY08 FY09 FY10 FY11MOTILAL OSWAL FINANCIAL SERVICES LIMITED 7

BUSINESS SNAPSHOTBROKING & DISTRIBUTIONDistribution expands to 1,644 business locations across 611 citiesMore than 700,000 registered customersDepository assets at `12,000 croresIndia’s largest dealing room (over 26,000 sq feet)Over 175 investor education seminars conductedINSTITUTIONAL EQUITIESOver 400 institutional clients, including over 300 FIIsResearch covering over 200 companies in over 20 sectors and 25 commoditiesIntroduced new research reports like ‘The Policy Maker – Insights from Bureaucrats’; ‘The Corner Office – Interactions With TheCEO’; ‘Wall Of Worry – The Whistleblower Series’; ‘GasoLine – The Oil & Gas Monthly’; ‘3T Tele Talk Time – The Telecom Monthly’;‘The PORTrait – Monthly Picture of Indian Ports’; ‘EcoScope – The Economy Observer’ and many moreINVESTMENT BANKING81 deals in 5 years across the product spectrum and sectorsCumulative revenues since inception of `245 croresFacilitated periodic thematic conclaves between corporates and investorsASSET MANAGEMENTPortfolio Management Services had an AUM of `1,258 crores and the Mutual Funds business had an AUM of `374 crores across itsthree Exchange Traded Funds (ETFs)Launched MOSt Shares M50 ETF, India's 1st fundamentally weighted ETF; based on the Nifty IndexLaunched MOSt Shares Midcap 100 ETF, India’s 1st midcap focused ETF; based on the CNX Midcap IndexLaunched MOSt Shares Nasdaq 100 ETF, India’s 1st US equities based ETFPRIVATE EQUITYIndia Business Excellence Fund (IBEF) has funds under management of US$ 125 million (`550 crores), and has committed~85% across 13 companies. Fund raising is currently underway for its 2nd growth capital fund - IBEF-IIIndia Realty Excellence Fund (IREF) has funds under management/advice of `200 crores. It has committed ~71% of its fundsunder management across 6 dealsWEALTH MANAGEMENTAUM of `1,100 croresPresence in Mumbai, Delhi, Kolkata, Pune and AhmedabadUnique Wealth Management offering (Purple Client Group) with advice on multi-asset classes including dedicated equity advisoryservices based on financial profiling and client need analysisLaunched Motilal Oswal Wealth Management System (WMS), an online portal for clients to track their wealth portfoliosFUND-BASED BUSINESSESMargin Funding book of `296 croresPrincipal Strategies Group to optimize treasury yieldsAll data as of March 31, 20118FINANCIAL STATEMENT 2010 - 2011

iTHE YEAR THAT WASASiAMONEYBROKERS POLLBe stPerformng Equity B rokerMotilal Oswal Securities was adjudged the ‘Best Performing Equity Broker’ at the CNBC TV18Financial Advisors Awards, 2010. It also won 4 awards at the ET-Now Starmine Analyst Awards,2010-11 (including the Best Earnings Estimator), placing it amongst the Top 3 award winningbrokers. Was also ranked No.2 by the AsiaMoney Brokers Poll, 2010 in the Best LocalBrokerage category.Motilal Oswal Securities bagged the QualTech Prize for Improvement, 2010 in the services category for a DMAICproject on reducing account opening turnaround time.Mr. Raamdeo Agrawal was honoured with an award for ‘Special Contribution towards IndianCapital Markets’ by Zee Business at ‘India’s Best Market Analyst Awards’.Motilal Oswal Securities launched ‘My Motilal Oswal’ - a new web service using a unique widget-based frameworkthat allows users to select what, where and how to see various information pieces; as per their individual needs.Motilal Oswal 6th Annual Global Investor Conference held in Mumbai with 110 corporateparticipants and 500 investors attending the event.The 15th Motilal Oswal Wealth Creation Study released with a theme on ‘Unknown and UnknowableInvesting’.Motilal Oswal Private Equity organized the 1st Annual Investor Meet of its India Real EstateFund (IREF).Motilal Oswal MOSt Shares M50 ETF was adjudged the ‘Most Innovative Fund of the Year’ at the CNBCTV18-CRISIL Mutual Fund Awards, 2011. Motilal Oswal AMC also became the first Indian AMC to ringthe opening bell at the Nasdaq exchange during the launch of the MOSt Shares Nasdaq 100 ETF.Motilal Oswal Investment Advisors won the “Asia Pacific Cross-Border Deal of the Year” and itsCEO, Mr Ashutosh Maheshvari, won the “India M&A Investment Banker” award at the AsiaPacific M&A Atlas Awards, 2010 for the transaction of Shree Renuka Sugar's acquisition ofBrazil’s Equipav SA .As part of its ongoing CSR activities, a Pan-India blood donation drive was organized in June, 2010. Thecampaign saw a successful turnout of over 200 people donating approx 71,000 ml of blood. To furtherfocus on CSR initiatives, the Board of Directors has decided to create the Motilal Oswal Foundation.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 9

Why do the Canada geese form a ‘V’ when flying in a flock? Becausethey know that flying together in a ‘V’ formation can help them movefaster and maintain flight longer than any one goose flying alone.

KEY PEOPLEMr. Motilal OswalChairman and Managing DirectorMr. Raamdeo AgrawalJoint Managing DirectorMr. Navin AgarwalDirector & CEO, Institutional EquitiesMr. Ashutosh MaheshvariCEO, Investment Banking BusinessMr. Rajat RajgarhiaHead, ResearchMr. Vishal TulsyanCEO, Private Equity BusinessMr. Nitin RakeshManaging Director & CEO,Asset Management BusinessMr. Srikanth IyengarHead, Principal Strategies BusinessMr. Vijay Kumar GoelHead, Broking and Distribution BusinessMr. Ajay Kumar MenonChief Operating Officer &Wholetime Director (MOSL)Mr. Harsh JoshiHead, Wealth Management Business &Wholetime Director (MOSL)Mr. Sameer KamathChief Financial OfficerMOTILAL OSWAL FINANCIAL SERVICES LIMITED 11

Why does the buck run zigzag when being chased by a cheetah? That’s becausethe nimble buck knows that the cheetah, as fast as he is, weighs more than thebuck; and therefore can’t change directions as quickly as it can.

DIRECTORS’ REPORTTo the MembersYour Directors have pleasure in presenting their 6th Report together with the audited Accounts of your Company for the yearended 31st March, 2011.Financial HighlightsSummary of Financial results for the year is as under: -Motilal Oswal Financial Services Limited (Standalone)R in CroresYear ended31st March, 2011Year ended31st March, 2010Income 64.25 64.26Profit before Interest and Taxation 57.70 60.16Interest (1.16) (2.85)Profit before Taxation 56.54 57.31Less : Provision for TaxationCurrent Tax 12.73 13.74Deferred Tax Asset 1.15 1.17Profit for the year 42.66 42.40Balance brought forward from previous year 35.13 22.41Profit Available for appropriation 77.79 64.81Less: AppropriationsTransfer to Statutory Reserve 8.53 8.48Proposed Dividend 20.23 17.18Dividend Distribution Tax 3.28 0.63Transfer to General Reserve 4.27 3.39Balance of Profit carried forward 41.48 35.13Summary of Consolidated Financial results of the Company and its subsidiaries for the year is as under: -R in Crores31st March, 2011 31st March, 2010Income 600.37 645.32Profit before Interest, Depreciation and Taxation and Exceptional Items 229.56 276.98Interest (5.69) (9.62)Depreciation (13.13) (14.19)Profit before Taxation and Exceptional Items 210.74 253.17Exceptional Items – 0.06Profit before Taxation 210.74 253.23Less : Provision for TaxationCurrent Tax 67.25 80.19Deferred Tax Asset / (Liability) 3.30 (1.79)Wealth Tax 0.03 0.02Tax for the prior year 0.66 0.39MOTILAL OSWAL FINANCIAL SERVICES LIMITED 13

DIRECTORS’ REPORTR in Crores31st March, 2011 31st March, 2010Profit after tax before Minority Interest 139.50 174.42Minority Interest in profits (2.44) (3.97)Profit after Tax and Minority Interest 137.06 170.45Profit brought forward from previous year 418.98 282.09Profit available for the Appropriations 556.04 452.54Less: AppropriationsTransfer to Statutory Reserve & Capital Redemption Reserve 9.13 8.48Pre acquisition (Profits) / Loss – (0.51)Proposed Dividend 21.54 17.18Distribution tax on Proposed Dividend 6.76 2.85Transfer to General Reserve 15.64 5.56Balance of Profit carried to Balance Sheet 502.96 418.98DividendKeeping in view the overall performance during the year, your Directors are pleased to recommend a dividend of R 1.40 perEquity Share on the face value of R 1 each being 140% dividend, payable to those members whose names appear in theRegister of Members as on the Book Closure Date. The Dividend and dividend distribution tax will absorb a sum of R 23.5crores.Results of Operations (MOFSL Standalone)The standalone revenues for the year were R 64.25 crores, largely flat as compared to R 64.26 crores last year. Interestincome went up by 55% to R 39.66 crores, on account of an increase in the average loan book size, as well as participation incertain IPO financing transactions for the Coal India, Power Grid and MOIL issues. Income from arbitrage operations was loweras compared to last financial year due to lower deployment of surplus funds in arbitrage.Due to higher operating expenses and provisioning for standard loan assets as required by the RBI, the total expenses (beforedepreciation and interest) registered a 59.44% jump to R 6.54 crores this year. Profit before depreciation, interest, andtaxation (EBITDA) decreased by 4.07% this year, from R 60.16 crores to R 57.71 crores. With a reduction in the Company’saverage borrowing this year, interest and finance charges fell by 59.40%. Hence, the Company’s net profit increased marginallyby 0.62% to R 42.66 crores.The detailed results of operations of the Company are given in the Management Discussion & Analysis forming part of thisReport.Consolidated Results of OperationsThe Consolidated Revenues of the Company for the year were R 600.37 crores, a decline of 6.97% as compared to theprevious year.– Broking and related revenues declined by 4.78% to R 433.37 crores this year. The market volumes have seen a dramaticshift towards the low-yield options segment which contributed 57% of total volumes, as compared to 37% a year back.This disproportionate rise of low yielding options segment has resulted in a drop of our overall market share from 3.2% to2.5% this year. However, our market share in the cash segment remains stable. As of 31st March, 2011 we had a totalof 709,041 customers, including 628,012 retail and distribution clients. Our retail distribution stands at 1,644 outletsacross 611 cities.– Investment banking fees fell by 38.70% to R 39.81 crores this year. This is attributed to revenue booking on few deals inadvanced stages of execution getting postponed to the next year. However, the deal pipeline remains robust for the nextyear.14FINANCIAL STATEMENT 2010 - 2011

DIRECTORS’ REPORT– Fund-based income for the year was R 73.79 crores, a growth of 13.73%. This was boosted by a 53.89% growth ininterest income to R 38.94 crores, as a result of the increase in the average loan book size this year.– Asset management fees increased by 6.66% to R 42.73 crores. With R 374 crores of assets managed under our threeETFs, the mutual fund fees increased this year. PMS fees went up by 18.08% to R 29.28 crores, as PMS assets grew fromR 981.7 crores to R 1,258.4 crores this year.– Other income declined by 47.45% to R 10.67 crores, as the previous year included profit on sale of investments ofR 11.23 crores.Total expenses remained largely flat for the year, at R 370.81 crores. The decline in brokerage commission earned reduced thebrokerage shared with intermediaries by 10.95% to R 138.96 crores. On the other hand, other operating costs and marketing/brand promotion expenses increased, due to the launch of the three mutual funds this year. Due to the lower revenues andconstant costs level this year, Profit before depreciation, interest, exceptional items and taxation (EBITDA) decreased by17.12% to R 229.56 crores. EBITDA margin reduced from 43% to 38%. Net profit for the year after minority interest stood atR 137.06 crores, a decline of 19.59%.The Consolidated Financial Statements of the Company and its subsidiaries prepared in accordance with ‘Accounting Standard- 21’ prescribed by The Institute of Chartered Accountants of India, form part of the Annual Report and the Accounts. TheBalance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries have not beenattached with the Balance Sheet of the Company as per the general exemption provided under Section 212(8) of theCompanies Act, 1956 by the Ministry of Corporate Affairs, issued vide General Circular No. 2/2011 dated 8th February, 2011.The Company hereby undertakes that annual accounts of the subsidiary companies and the related detailed information shallbe made available to shareholders of the holding and subsidiary companies seeking such information at any point of time.The annual accounts of the subsidiary companies shall also be kept for inspection by any shareholders in the registered officeof the Company and of the subsidiary companies concerned. The Company shall furnish a hard copy of details of accounts ofsubsidiaries to any shareholder on demand.The detailed results of operations of the Company and its subsidiaries are given in the Management Discussion & Analysisforming part of this report.Future OutlookIndian capital markets witnessed a challenging year with volatile FII net flows, muted retail participation in equities, growingshift towards low-yielding options and lower value of ECM deals. These were reflected in the overall market performance aswell as in our own business performance.We strongly believe that India is a great growth story and is likely to become a US$ 5 trillion economy by 2020. Backed bystrong savings, there would be tremendous growth opportunities for the firms operating in the financial services space.During the current year, we have laid a strong foundation for each of our business to scale up and grab a meaningful share ofthese opportunities.Credit RatingThe Company continues to enjoy the highest rating of ‘P1+’ assigned by CRISIL Limited to the Short-term Debt Programmeof R 400 crores of your Company. The rating indicates the highest degree of safety with regard to timely payment of interestand principal on the instrument.CRISIL Limited also reaffirmed the rating of ‘P1+’ to the Short-term Debt Programme of R 400 crores of Motilal OswalSecurities Limited, a subsidiary of the Company.FinanceDuring the year under review, to meet the working capital requirements, the Company has issued Commercial Papers andUnsecured Non-convertible Debentures.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 15

DIRECTORS’ REPORTEmployees’ Stock Option Schemes (ESOS)Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure to this Report.DirectorsMr. Ramesh Agarwal and Mr. Madhav Bhatkuly, Independent Directors retire by rotation at the forthcoming Annual GeneralMeeting and due to their respective preoccupations do not offer themselves for re-appointment.The Board of Directors re-appointed Mr. Motilal Oswal as the Managing Director of the Company, for a further period of 5 years,with effect from 18th January, 2011, subject to the approval of the Members at the forthcoming Annual General Meeting ofthe Company.Mr. Vivek Paranjpe was appointed as an Additional Director on 28th January, 2011 by the Board of Directors. It would berequired to appoint him as a Director by the Members at the forthcoming Annual General Meeting.Directors’ Responsibility StatementPursuant to section 217(2AA) of the Companies Act, 1956, your Directors confirm that:(i) in the preparation of the annual accounts, the applicable accounting standards have been followed;(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been appliedconsistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view ofthe state of affairs of the Company as at 31st March, 2011 and of the Profit of the Company for the year ended on thatdate;(iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities; and(iv) the annual accounts have been prepared on a going concern basis.Audit CommitteeThe Audit Committee presently comprises of Mr. Balkumar Agarwal (Chairman of the Committee), Mr. Ramesh Agarwal, Mr.Madhav Bhatkuly and Mr. Raamdeo Agrawal.Remuneration / Compensation CommitteeThe Remuneration/Compensation Committee of the Board of Directors presently comprises of Mr. Balkumar Agarwal (Chairmanof the Committee), Mr. Ramesh Agarwal and Mr. Motilal Oswal.Shareholders / Investors’ Grievance CommitteeThe Shareholders/Investors Grievance Committee of the Board of Directors presently comprises of Mr. Balkumar Agarwal(Chairman of the Committee), Mr. Motilal Oswal and Mr. Raamdeo Agrawal.Nomination CommitteeThe Nomination Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Raamdeo Agrawal.Risk Management CommitteeThe Risk Management Committee of the Board of Directors presently comprises of Mr. Motilal Oswal and Mr. Navin Agarwal.Corporate GovernanceA report on the Corporate Governance along with a certificate from the Auditors of the Company regarding the compliance ofconditions of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under Clause 49of the Listing Agreement are annexed to this Report.16FINANCIAL STATEMENT 2010 - 2011

DIRECTORS’ REPORTAuditorsMessrs Haribhakti & Co., Chartered Accountants, retire as Auditors of the Company at the forthcoming Annual General Meetingand have given their consent for re-appointment. The members will be required to appoint Auditors for the current year andfix their remuneration.Fixed Deposits and Loans / AdvancesThe Company has not accepted any deposits from the public or employees during the year under review.The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc.,required to be disclosed in the annual accounts of the company pursuant to Clause 32 of the Listing Agreement with theCompany, are furnished separately.Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and OutgoIn view of the nature of activities which are being carried on by the Company, Rules 2A and 2B of the Companies (Disclosureof Particulars in the Report of Board of Directors) Rules, 1988 concerning conservation of energy and technology absorptionrespectively are not applicable to the Company.There was no inflow of foreign exchange during the year under review. Details of the foreign exchange outflow are given in thenotes to Accounts.Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and Rulesframed thereunderIn accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the Rules framed thereunder, thenames and other particulars of employees are set out in the Annexure to the Directors’ Report. In terms of the provisions ofSection 219(1)(b)(iv) of the Companies Act, 1956, the Directors’ Report is being sent to all the Shareholders of the Companyexcluding the aforesaid Annexure. The Annexure is available for inspection at the Registered Office of the Company. Anyshareholder interested in obtaining a copy of the said Annexure may write to the Company Secretary & Compliance Officer atthe Registered Office of the Company.AcknowledgementsYour Directors take this opportunity to thank the Authorities, Bankers, Shareholders and the Customers of the Company fortheir continued support to the Company. The Directors also place on record their sincere appreciation of the contributionsmade by every member of the MOFSL family for their dedicated efforts that made these results achievable.For and on behalf of the BoardMotilal OswalChairman & Managing DirectorMumbai, 30th April, 2011MOTILAL OSWAL FINANCIAL SERVICES LIMITED 17

ANNEXURE TO THE DIRECTORS’ REPORTStatement pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies.Particulars Name of theSubsidiaryCompanyMotilal OswalSecurities Ltd.The Financial Year of theSubsidiary ended onNumber of Shares in theSubsidiary Company held byMotilal Oswal Financial ServicesLimited at the above date31st March,2011Name of theSubsidiaryCompanyMotilal OswalCommoditiesBroker Pvt. Ltd.31st March,2011Name of theSubsidiaryCompanyMotilal OswalPrivate EquityAdvisors Pvt. Ltd.31st March,2011Name of theSubsidiaryCompanyMotilal OswalInvestmentAdvisors Pvt. Ltd.31st March,2011Name of theSubsidiaryCompanyMotilal OswalInsuranceBroker Pvt. Ltd.31st March,2011Name of theSubsidiaryCompanyMotilal OswalCapital MarketsPvt. Ltd.31st March,2011Name of theSubsidiaryCompanyAntop TradersPvt. Ltd.31st March,2011Name of theSubsidiaryCompanyMotilal OswalAsset ManagementCompany Ltd.31st March,2011Name of theSubsidiaryCompanyMotilal OswalTrusteeCompany Ltd.31st March,2011Equity (Nos.) 1,318,218 400,000 50,000 875,000 990,000 350,000 3 30,000,000 100,000TotalExtent of holding (%) 99.95% 97.55% 85.00% 87.50% 99.00% 99.95% 99.95% 99.95% 99.95%The net aggregate of profits/(losses) of the SubsidaryCompany for its financialperiod so far as they concernthe member of Motilal OswalFinancial Services Limited(a) Dealt with in the accountsof Motilal Oswal FinancialServices Limited for the yearended 31st March, 2011(b) Not dealt with in the accountsof Motilal Oswal FinancialServices Limited for the yearended 31st March, 2011The net aggregate of profits/(losses) of the SubsidiaryCompany for its previous financialperiods so far as they concernthe member of Motilal OswalFinancial Services Limited(a) Dealt with in the accountsof Motilal Oswal FinancialServices Limited for the yearended 31st March, 2011(b) Not dealt with in the accountsof Motilal Oswal FinancialServices Limited for the yearended 31st March, 2011NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL1,007,549,339 24,753,489 19,321,673 113,627,104 (1,667,279) 3,881,519 3,462,313 (85,429,803) (14,010) 1,085,484,345NIL NIL NIL 134,062,500 NIL NIL NIL NIL NIL 134,062,5004,658,317,188 20,455,572 45,488,531 131,151,102 (2,285,757) (2,495,870) 6,211,057 (44,841,925) (113,278) 4,811,886,621For and on behalf of the Board ofMotilal Oswal Financial Services LimitedMotilal Oswal Raamdeo Agrawal(Chairman & Managing Director) (Jt. Managing Director)Place : Mumbai Samrat SanyalDated : 30th April, 2011 (Company Secretary and Compliance Officer)18FINANCIAL STATEMENT 2010 - 2011

ANNEXURE TO THE DIRECTORS’ REPORTParticulars of loans / advances and investment in its own shares by listed companies, their subsidiaries, associates,etc., required to be disclosed in the annual accounts of the Company pursuant to Clause 32 of the Listing Agreementwith the parent company, Motilal Oswal Financial Services Limited.Loans and advances in the nature of loans to subsidiaries:(R in Crores)Name of the Company Balance as on 31st March, 2011 Maximum outstanding during the yearMotilal Oswal Commodities Broker Pvt. Ltd. – 3.00Motilal Oswal Private Equity Advisors Pvt. Ltd. – 2.30Motilal Oswal Investment Advisors Pvt. Ltd. – 2.60Motilal Oswal Capital Markets Pvt. Ltd. – 8.86Motilal Oswal Securities Ltd. – 69.10Motilal Oswal Insurance Brokers Pvt. Ltd. – 0.05Motilal Oswal Asset Management Co. Ltd. – 0.70Except as indicated above, the Company has not made any loans and advances in the nature of loans to associates or loansand advances in the nature of loans where there is no repayment schedule or repayment beyond seven years or no interest orinterest below Section 372A of the Companies Act, 1956.Investment by the loanee in the shares of the Company and the subsidiary companies when the Company has made loans oradvances in the nature of loans: NIL.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 19

ANNEXURE TO THE DIRECTORS’ REPORTInformation disclosed under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee StockPurchase Scheme) Guidelines, 1999 as at 31st March, 2011:-S.No.Particulars‘Motilal OswalFinancial ServicesLimited –Employees’ StockOption Scheme –III’ (ESOS – III)‘Motilal OswalFinancial ServicesLimited –Employees’ StockOption Scheme –IV’ (ESOS – IV)‘Motilal Oswal FinancialServices Limited – Employees’Stock Option Scheme – V’(ESOS – V)‘Motilal Oswal FinancialServices Limited – Employees’Stock Option Scheme – VI’(ESOS – VI)a) Options granted 12,61,500 2,00,000 58,17,500 50,84,000b) The pricing formula Price at whichshares are issuedto Private EquityInvestor i.e. at theRate of R 518.90per share.Price arrived atwith reference tothe expected IssuePrice i.e. at R 775per share.The closing price of theCompany’s Equity Sharesquoted on the Bombay StockExchange Limited immediatelypreceding the date of Grant ofthe Stock Options, which forthis purpose shall be the dateon which the Committee grantthe Stock Options, discountedby such percentage as may bedetermined by the Committeein the best interest of thevarious stakeholders in theprevailing market conditions.The closing price of theCompany’s Equity Shares,prior to the date of grant ofthe Options, on the StockExchanges where the highesttrading volume is recorded,discounted /increased bysuch percentage as may bedetermined by the Committee.c) Options vested 10,12,575 5,000 57,000 40,750d) Options exercised 6,41,475 5,000 54,500 40,750e) The total number of shares arising 12,82,950 25,000 54,500 40,750as a result of exercise of optionf) Options lapsed (as at 31.03.11) 5,93,175 1,90,000 33,52,500 5,88,500g) Variation of terms of options N. A. N. A. N. A. N. A.h) Money realised by exercise of R 13,31,44,551 R 38,75,000 R 90,82,238 R 67,43,375optionsi) Total number of options in force (as 26,850 5,000 24,10,500 44,54,750at 31.03.11)j) Employee-wise details of optionsgranted to:(i) Senior managerial personnel N.A. N.A. Nil Mr. Sudhir Dhar10,000 Options(ii) Any other employee who N. A. N. A. N.A. N.A.receives a grant in any oneyear of option amounting to5% or more of option grantedduring that year(iii) Identified employees who weregranted option, during any oneyear, equal to or exceeding 1%of the issued capital (excludingoutstanding warrants andconversions) of the companyat the time of grantk) Diluted Earnings Per Share (EPS)pursuant to issue of shares onexercise of option calculatedin accordance with AccountingStandard (AS) 20 ‘Earnings perShare’N. A. N. A. N. A. N. A.R 2.96 R 2.96 R 2.96 R 2.9620FINANCIAL STATEMENT 2010 - 2011

ANNEXURE TO THE DIRECTORS’ REPORTS.No.Particularsl) Where the company has calculatedthe employee compensation costusing the intrinsic value of the stockoptions, the difference betweenthe employee compensation costso computed and the employeecompensation cost that shallhave been recognised if it hadused the fair value of the options,shall be disclosed. The impact ofthis difference on profits and onEPS of the company shall also bedisclosed.m) Weighted-average exercise pricesand weighted average fair valuesof options shall be disclosedseparately for options whoseexercise price either equals orexceeds or is less than the marketprice of the stock.n) A description of the method andsignificant assumptions used duringthe year to estimate the fair valuesof options, including the followingweighted-average information:-Nil Nil The Company has calculated the employee compensation costusing the intrinsic value of stock options. Had the fair valuemethod been used, in respect of stock options granted underESOS – V and ESOS - VI, the employee compensation costwould have been higher by R 10,48,86,857/- Profit after taxlower by R 10,48,86,857/- and the basic earnings per sharewould have been lower by R 0.73.N. A. N. A. i) Option Grant Date:20th October, 2010 for2,75,000 optionsii) Exercise Price: R 208.70per optioniii) Fair Value: R 46.18 peroptionN. A. N. A. The fair-value of the stockoptions granted on 20thOctober, 2010 have beencalculated using Black-Scholes Options pricingFormula and the significantassumptions made in thisregard are as follows:(I) i) Option Grant Date:27th April 2010 for9,20,000 options.ii) Exercise Price: R 165per optioniii) Fair Value: R 33.28 peroption(II) i) Option Grant Date:20th October 2010 for8,49,000 options.ii) Exercise Price:R 208.70 per optioniii) Fair Value: R 46.18 peroption.The fair-value of the stockoptions granted on 27th April2010 and 20th October, 2010have been calculated usingBlack-Scholes Options pricingFormula and the significantassumptions made in thisregard are as follows:(i) risk-free interest rate N. A. N. A. 6% 6%(ii) expected life N. A. N. A. 3 years 3 years(iii) expected volatility N. A. N. A. 20% 20%(iv) expected dividends, and N. A. N. A. 1% 1%(v) the price of the underlying sharein market at the time of optiongrant.‘Motilal OswalFinancial ServicesLimited –Employees’ StockOption Scheme –III’ (ESOS – III)The Companywas an unlistedcompany at thetime of grant.However, theOptions weregranted at theprice at whichShares wereissued to PrivateEquity Investori.e. R 518.90 pershare.‘Motilal OswalFinancial ServicesLimited –Employees’ StockOption Scheme –IV’ (ESOS – IV)The Companywas an unlistedcompany at thetime of grant.However, theOptions weregranted at theprice which wasdetermined withreference to theexpected IssuePrice.‘Motilal Oswal FinancialServices Limited – Employees’Stock Option Scheme – V’(ESOS – V)‘Motilal Oswal FinancialServices Limited – Employees’Stock Option Scheme – VI’(ESOS – VI)R 208.70 per share i) R 164.55 per share forgrant date 27.04.2010ii)R 208.70 per share forgrant date 20.10.2010MOTILAL OSWAL FINANCIAL SERVICES LIMITED 21

MANAGEMENT DISCUSSION AND ANALYSISEconomic growth in the NTD era set to unleash the potential of financial servicesIndia’s GDP to witness phenomenal growth of 3x; expectedto reach US$ 5 trillion by 2020Since 1980, the Indian economy has achieved an average growthrate higher than both developed and emerging economies,second only to China.While India took 60 years since independence to reach its firstUS$ trillion of GDP in 2008, the next US$ trillion of GDP (NTD)is expected to be achieved within 5 years, assuming a nominalGDP growth rate of 14-15% and constant US$ exchange rates.Furthermore, India’s GDP is expected to triple from current levelsto reach US$ 5 trillion by 2020. Such a high and sustainedeconomic growth will raise income, investment allocations anddiscretionary spending further.Source: RBIGDP growth to increase gross domestic savings further; whichwill give a boost for the demand of financial servicesIndia is a high savings-oriented country. The country’s grossdomestic savings (GDS) to GDP ratio increased from 30% inFY04 to 34% in FY09, a CAGR of 17%. In the same period,gross fixed capital formation (GFCF) grew from 25% to 32% toGDP, a CAGR of 20%. Based on the long term GDP trends, GDSis expected to rise even further, up to 40% of GDP by 2020.This translates into cumulative savings of US$ 9-10 trillion inthe decade ending 2020, higher than the US$ 2.7 trillion in theprevious decade, an immense opportunity for financial services.Source: MOSL EstimatesRobust growth in per capita income and personaldisposable income levelsPer capita net national income (PCI) is growing at a faster rate,as compared to GDP. Both the 5 year CAGR and 2010-11 YoYgrowth of PCI are almost double to that of GDP. This signifies aproportionally higher growth of money in the people’s pocketsand a potential to increase discretionary spending.Source: RBI, Economic SurveyBFSI segment outperforming amongst Indian GDP segmentsLooking at GDP segments specifically, the output of Financing,Insurance, Real Estate and Business Services segment hasoutperformed the entire GDP, as well as the traditional segmentslike manufacturing and agriculture, on a consistent basis. As perthe Economic Survey’s advance estimates, this outperformancewill continue even in FY11.Source: Economic SurveyWhile personal disposable income has been growing at a rapidrate, the historic growth in India’s household financial savingshas been higher than that in personal disposable income,indicating a rising allocation towards financial investments. Thisbodes well for financial services companies.Source: Economic Survey22FINANCIAL STATEMENT 2010 - 2011

MANAGEMENT DISCUSSION AND ANALYSISIndian equity markets deliver strong performance buoyedby GDP growth; a sustained economic performance bodeswell for equity activityIndian exchanges are now amongst the top 10 exchangesglobally, in terms of equity market capitalization in 2010, as perWFE data.Robust economic performance is expected to enhance themarket performance as corporate bottom-lines, fund-raisingsand listings increase. The encouraging feature here is thatIndia’s share (BSE) to world market capitalization has increasedby a larger proportion than its share to world’s GDP over the lastdecade.Opportunity outside the four citiesMumbai, Delhi, Kolkata, Ahmedabad have traditionallydominated equity participation in India, while the remainingcities have largely lagged. However, a recent FICCI-McKinseyreport stated that almost 75% of India’s income pool liesoutside Delhi-Mumbai. With such a broad-based income poolacross all cities, there exists an opportunity to tap these forequity participation. Companies with a vast pan-India reach arebest poised to tap this opportunity.Source: IMF, WFE dataMSCI indices data shows that India has delivered stellarperformance over the long-term. The historical 10 year return inIndia is higher, as compared to most global peers. Although, itstarted 2011 on a shaky note over input costs and interest ratesconcerns, the recent upward trend in the beginning of FY12 is asign that the investor confidence in India is strong.Source: NSE FactbookPressure to maintain market-shares amid competition mayforce consolidationsDespite the growth in equity participation, industry consolidationhas remained quite slow. Assuming that consolidation followsperiods of downturns, there was a trend following the bear periodin 2000, but this has not continued since 2008. As competitionincreases and market shares of companies comes underpressure, the twin objectives of cost minimization and higherinvestment outlays will force further industry consolidation.Source: MSCI Barra dataAlong with performance, the markets are gradually seeing lowerlevels of volatility since the last 2-3 years. Volatility (standarddeviation) of Nifty and DJIA Indices shows that while Niftyhas been more volatile than DJIA, however, the level itself iscoming down since FY09. Lower volatility can help investors gainconfidence to participate with the long-term objective.Source: NSE FactbookEquity investing by households still lowAlthough the growth in Indian income levels has given a fill-upto financial services, however it is yet to be fully visible in thecase of equity investments specifically. RBI data on changesin financial assets of households shows that the proportion ofshares and debentures increased to 8% in 2007-09, just amarginal increase from the 6% seen a decade ago in 1999-2001. This is very low when compared to the growth in bankdeposit and life insurance segments.Source: NSE, Yahoo FinanceWith rising income pool across the country, the opportunityis broad-based across India; however, certain challengespersistSource: RBI dataMOTILAL OSWAL FINANCIAL SERVICES LIMITED 23

MANAGEMENT DISCUSSION AND ANALYSISBusiness Streams and Outlook:Motilal Oswal Financial Services Limited (MOFSL), is a non-banking financial company (NBFC), registered under the Reserve Bank ofIndia Act, 1934. The company’s standalone operations have two critical elements:(i) Build on a financing infrastructure that can best customize risk adjusted products, have simple and compliant documentation,and prompt loan approval procedures; and(ii) A strong structure in place that can most efficiently source funds and manage resources.There is a clearly defined set of procedures for evaluating the creditworthiness of customers that extends from initial evaluationto loan approval. Funds are advanced after due process of evaluation and upon providing the necessary documentation. A lot ofemphasis is placed on tailoring finance to customer needs. MOFSL’s objective is to ensure appraisal and disbursement within theshortest possible time, without compromising on asset quality.The company also raises resources through short-term borrowings. During FY11, CRISIL Limited assigned a rating of ‘P1+’ thehighest rating, for the company’s short-term borrowing programme of R 400 crores. CRISIL Limited also assigned the rating of ‘P1+’to MOSL’s short-term borrowing program of R 400 crores.Besides the financing business directly carried out through MOFSL, we offer a range of financial products and services such asBroking and Distribution, Institutional Equities, Wealth Management, Investment Banking, Private Equity and Asset Managementbusiness through various subsidiaries:Name of the Company Business MOFSL’s Shareholding1 Motilal Oswal Securities Limited (MOSL) Stock Broking (Institutional & Retail) and 99.95%Wealth Management2 Motilal Oswal Investment Advisors Private Limited (MOIA) Investment Banking 87.50%3 Motilal Oswal Asset Management Company (MOAMC) Mutual Funds, PMS, Offshore Funds 99.95%*4 Motilal Oswal Private Equity Advisors Private Limited (MOPE) Private Equity Management and Advisory 85.00%5 Motilal Oswal Commodities Broker Private Limited (MOCB) Commodities Broking 97.55%6 Motilal Oswal Capital Markets Private Limited (a subsidiary of MOSL) Stock Broking (membership of NSE) 99.95%*7 Motilal Oswal Insurance Brokers Private Limited (MOIB) Insurance Brokers (has applied to IRDA 99.00%for Insurance Broker License)8 Antop Traders Private Limited (a subsidiary of MOSL) Lease Rental 99.95%*9 Motilal Oswal Trustee Company Limited (MOTC) (a subsidiary of MOSL) Trustee to Mutual Fund 99.95%** through MOSLBusiness streamsBusiness StreamPrimary products and servicesBroking & Distribution● Equity (cash and derivatives) and commodity brokingWealth Management● Distribution of financial products like Mutual Funds, PMS, IPO and Insurance● Financing● Depository servicesInstitutional Broking ● Equity (cash and derivatives) broking● AdvisoryInvestment Banking ● Capital raising● M&A Advisory● Domestic IPOs● Private Equity placements● Corporate Finance Advisory● Restructuring● FCCBs and GDRsPrivate Equity ● Private equity investment management and advisoryAsset Management ● Portfolio Management Services● Mutual Funds● Offshore Funds24FINANCIAL STATEMENT 2010 - 2011

MANAGEMENT DISCUSSION AND ANALYSISBroking BusinessIndustry FactsIn FY11, the benchmark BSE Sensex rose 11%, as compared to the 80% growth in FY10. Market capitalization on BSE also wentup 11%, from R 61.66 lakh crores in March 2010 to R 68.39 lakh crores in March 2011, buoyed by the large public issues duringthe year.India continues to remain a top destination for FIIsParticipation from Indian DIIs yet to reach a scalecomparable to its foreign counterpartsHigh FII net inflows continued in FY11, boosting the markets toreach all-time highs in November, since 2008. Despite the FIIoutflows between Jan and March 2011, the inflow from Marchendsignifies the conviction of the foreign investors in the longtermpotential of the Indian markets.DII participation remained muted throughout this fiscal, withnet outflows seen in FY11. The recent changes in guidelines formutual funds hit their inflows hard. However, the recent sell-offby FIIs between Jan and March 2011 saw corresponding buyingby DIIs, affirming the belief that DIIs increase their participationduring market downturns, thus offering support at lower levels.Source: SEBISource: NSEGrowth in equity market volumes led by the F&O segment, especially options, while cash volumes are dryingThe equity market’s average daily volumes increased for the second successive year to R 1.33 lakh crores in FY11, up 40% fromFY10. The main contributor to this growth was the F&O segment, which grew 58% to reach R 1.15 lakh crores in FY11. The proportionof F&O to total volumes increased from 72% in FY08 to 86% in FY11. Options contributed 57% of total volumes in FY11, significantlyhigher than the 9% back in FY08. Given the decline in cash volumes, the only silver lining is that the proportion of delivery volumeshas gone up to 27% of cash volumes in FY11, from 22% in FY10. But despite this stellar growth in overall market volumes, thebrokerage business has remained under pressure. This is because F&O, especially options, is a low-yield segment as compared tothe high-yield cash segment. Thus, the overall broking pool has not shown a corresponding growth, as compared to that seen inmarket volumes.Historical trends show that the proportion of cash volumes in advanced markets like America and Europe, where both cash and F&Osegments are developed, is about 30-40%. In India, it has been close to the ~25% mark. It is only last year that the F&O volumeshave picked up. The cash volumes in India are expected to mirror the global markets and return to its historical average over themedium to long term. As the Indian markets show a sustained, directional trend, positive sentiments will drive up retail participationdirectly or through IPOs, which augers well for the cash market volumes. As players focusing on the cash side of the business havetraditionally seen higher profitability levels, they are expected to witness higher profitability growth as the above trend reversal unfolds.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 25

MANAGEMENT DISCUSSION AND ANALYSISRetail participation in cash markets marginally reduced in FY11Record FII flows into India saw FII participation rising in cashvolumes, from 12% in FY10 to 15% in FY11. Proportion of retailparticipation, which touched a high last year, declined marginallyto 56% in FY11, while that of proprietory reduced from 26% to22%.Demat accounts expected to pick up with PSU IPOslined upBetween FY03 and FY11, demat accounts grew at a CAGR of21%. With quality PSU stocks lined up for IPOs and structuralchanges like mutual fund transactions being facilitated throughexchanges, the growth in demat accounts should pick up further.Source: CDSL & NSDLOur Broking BusinessBacked by award winning research capabilities, the company’s broking business covers an entire spectrum of participants, rangingfrom FIIs to domestic institutions, HNIs to retail clients. This large clientele base is addressed through distinctly positioned businessunits – Retail Broking & Distribution and Institutional Equities business.Retail Segment:Services offered under the “Broking and Distribution business” include equities, derivatives, commodities, depository services,distribution of portfolio management services, mutual funds, primary equity offerings and insurance products.As of 31st March, 2011, MOFSL had over 700,000 registered customers, which included over 628,000 broking clients with almost540,000 having depository accounts. The company serves its clients through strong branches and franchisee network spread acrossIndia. It has a large Pan-India network with presence in 611 cities comprising 1,644 business locations, spanning the franchisenetwork and 26 branches. This extensive network provides opportunities to cross-sell products as the company diversifies into newbusiness streams. In addition, there is a strong online platform to help clients use the company’s services at their convenient location.Giving priority to enhancing customer experience, MOFSL launched ‘My Motilal Oswal’ in FY11, a new web service using a uniquewidget-based framework that allows users choose what, where and how to see various information pieces, as per his individual needs.The company’s superior execution of broking services was recognized when it was adjudged as the ‘Best Performing Equity Broker’at the CNBC TV18 Financial Advisors Awards in 2010. It also bagged the QualTech Prize for Improvement - 2010 in the servicescategory in September, 2010. The award winning project was a DMAIC project done to reduce the account opening turnaround time.During the year, MOSL entered into a strategic alliance with Barclays Bank, for an equity trading platform for Barclays customers.With an aim to provide best research and advisory, a core focus of the company, the clients are advised by the centralized advisoryand dealing desk based in Mumbai, situated in 26,500 sq.ft of area. With Knowledge First as the guiding philosophy, the companyhas actively conducted investor education and financial awareness seminars across the country covering various aspects of investing.With its core strength of providing excellent research and advisory, the company continues to focus on the high-yielding cash segment.As the market performance and retail participation picks up, the company will be best poised to capture the resultant upside.26FINANCIAL STATEMENT 2010 - 2011

MANAGEMENT DISCUSSION AND ANALYSISInstitutional BrokingThe company offers Institutional Broking services in cash and derivatives segment to a large institutional clientele in India andabroad. These include mutual funds, banks, financial institutions, insurance companies, and FIIs. As on 31st March, 2011, we wereempanelled with over 400 institutional clients, including over 300 FIIs. The Institutional Team comprises Sales and Dealing, Researchand Corporate Access staff. The research team consists of 29 research analysts and covers over 200 companies across 20 sectorsand 25 commodities, and provides a complete bouquet covering Thematic, Sectoral, Company Updates, Periodicals, Expert Speakand Ground Reality.Quarterly India Strategy Detailed Sector Company Updates Informative Periodicals Not Just Desk ResearchMOSL won 4 awards at the ET-NOW Starmine Analyst Awards 2010-2011 putting it amongst the Top 3 award winning brokers at theawards. It was also ranked No. 2 by AsiaMoney Brokers Poll 2010 in the Best Local Brokerage category. The company conducted the6th Annual Global Investor Conference in Mumbai during August 2010, with almost 110 corporate participants and 500 investors.India continues to lead as one of the favoured investment destinations for global funds. MOSL’s strong clientele base spread acrossthe globe and its constant endeavour to provide best in-class research, advice, corporate access and execution support will also helpto tap these emerging opportunities and gain higher market share across all the institutional client segments.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 27

MANAGEMENT DISCUSSION AND ANALYSISInvestment BankingIndustry FactsWith robust economic growth and improved performance of earlier cross-border transactions, M&A deal activity picked up in CY10.Deal value increased almost 4x to R 2.28 lakh crores and deal volumes doubled to 662 in CY10, as compared to CY09. The averagedeal value was R 343.9 crores in CY10, double to that of CY09. Within deal segments, the biggest proportional rise was in outbounddeals. Domestic M&A and inbound deals also doubled in terms of total deal value, on a YoY basis. In terms of sectors, the largestdeal values this year were in telecom, oil & gas, healthcare and pharmaceuticals.With corporate expansions, total capital raisings picked up in FY11. But this was led by fund raising only through the debt route,while fund raising through equity slipped in FY11. Within equity capital markets, the proportion raised through IPOs doubled in FY11,as compared to the previous year, following the successful Coal India issue, one of the largest public issues in India. Amount raisedvia QIPs, the largest gaining segment last year, saw a fall in FY11. Within debt markets, the loan segment, both INR and foreign,continues to be the preferred debt capital source for Indian businesses, while the proportion of bonds issued declined this year.Mergers and Acquisitions (R Cr) Fund Raising - Equity Markets (R Cr) Fund Raising - Debt Markets (R Cr)Source: Grant Thornton M&A Tracker Source: Bloomberg League Tables Source: Bloomberg League TablesOur Investment Banking BusinessSelect deals of FY11MOIAPL won the “AsiaPacific Cross-BorderDeal of the Year” award,and its CEO won the“Indian M&A InvestmentBanker” award at theAsia Pacific M&A AtlasAwards with this dealThe team at Motilal Oswal Investment Advisors (MOIAPL) comprises multidisciplinaryprofessionals with a collective banking and corporate financeadvisory experience of more than twelve decades. An extensive understandingof different sectors within the Investment Banking team underpinned by thestrong research pedigree of the Group enables it to provide customized financialsolutions to clients across industries.Since inception in 2006, the investment banking unit has executed milestonetransactions in equity capital market as well as in financial advisory, therebyestablishing a solid track record in the investment banking space.An established track record, strong corporate relationships, experiencedteam and synergies within the group sets the right impetus to capture theopportunities emerging from Corporate India as it heads into the Next TrillionDollar era; helping to build a strong and profitable franchisee in this business.28FINANCIAL STATEMENT 2010 - 2011

MANAGEMENT DISCUSSION AND ANALYSISAsset ManagementIndustry FactsThe mutual funds industry endured a tough FY11, with regulations like banning of entry load, as well as redemptions of debt funds bycorporates, banks to fund 3G licenses, negatively impacting inflows. However, the long-term prospects remain positive. According toresearch by RNCOS, mutual funds are set to be a preferred investment option, with increasing income, awareness and risk appetitegiving a fill-up to personal financial assets. Mutual funds AUM is expected to reach R 13.25 lakh crores by 2014, a CAGR of 15%.Mutual Fund AUM by Asset Class (R Cr) Mutual Fund AUM by Participants (R Cr) Share of ETF assets in the AMC industrySource: AMFIAssets under management of Indian mutualfunds fell 3.5% to R 5.92 lakh crores ason 31st March, 2011, as compared toR 6.14 lakh crores a year back. While theproportion of income and liquid assetsfell this year, the proportion of equity andbalanced funds rose, as well as of ETFs.ETF assets grew from R 2,547 crores toR 6,916 crores in the same period.Our Asset Management BusinessMutual Funds: MOSt Shares ETF Assets (R Cr)Source: AMFIIn terms of participants, retail investorscomprise the largest participant groupin equity funds, holding 66% of equityfund assets, as on 31th March 2011.Conversely, corporates are the largestinvestor group in liquid, money marketand income funds, holding 76% of liquid/money market funds alone. Retail andHNIs together hold half the assets in newfund classes, like gold, ETF etc.Source: Blackrock ETF Industry Highlights,Bloomberg, ICI FactbookShare of ETFs assets in the AMC industry isgrowing. ETF assets in US have increasedto 8%, while ETF assets comprise about 3%of total European investment funds. India isalso showing an uptrend. Despite being alate entrant in the ETF space, Indian ETFscomprise about 1% of the total AUM ofmutual funds. With ETFs gaining popularity,this is set to grow further.the US stocks of Nasdaq 100 Index. During its launch, MOAMCbecame the first Indian AMC to ring the opening bell at theNasdaq exchange.Portfolio Management Services Assets (R Cr)The company’s asset management arm, MOAMC, launched3 funds in FY11. Given the high-growth prospects in the ETFspace, all the 3 funds were ETFs and were ground-breakerswithin the AMC space.Launched in July 2010, MOSt Shares M50 ETF was India’s 1stfundamentally weighted ETF. Based on Nifty Index, the constituentsecurities are rebalanced as per the stock’s fundamentals usingproprietary methodology. It raised R 235 crores in its NFO; thelargest amount raised in any equity ETF’s NFO in the past 5years. The fund bagged the ‘Most Innovative Fund of the Year’award at CNBC TV18-CRISIL Mutual Fund Awards 2011, heldin Mumbai.Next was the MOSt Shares Midcap 100 ETF in Feb 2011, apassive product focused on midcaps, replicating the CNX MidcapIndex. A first-of-its-kind in India, it mobilized R 125 crores duringits NFO.Lastly, MOAMC launched MOSt Shares Nasdaq 100 ETF in March2011, an innovative product giving Indian investors exposure toThe Portfolio Management Services (PMS) business attractedsignificant investor interest with the AUM reaching R 1,258crores, as of 31st March, 2011. With an objective to spreadawareness of the benefits of long-term investing, the companyheld its 1st Value Investing Forum in March 2010.The strong investment culture entrenched within the Group hashelped to deliver superior returns to the investors. A Morning Starreport on the flagship product under the PMS umbrella attributedthe fund’s long term outperformance versus benchmark tosuperior stock selection capabilities of the fund manager.PMS products were hitherto distributed through captivedistribution channels within the Group. During the year thedistribution network got a solid impetus with arrangements withnational distributors and several private banks for selling thecompany’s PMS products on their platforms.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 29

MANAGEMENT DISCUSSION AND ANALYSISPrivate EquityPE Deal Value (US$ Bn) and Average Deal Size (US$ Mn)Industry FactsWith companies looking to expand, private equity activity inIndia saw higher deal values in FY11. Total private equity dealvalue increased by a whopping 65% to reach US$ 9.13 billionin FY11, as compared to FY10. The average value per dealwent up 41% from US$ 20.0 million to US$ 28.2 million duringthe same period, to match the high seen in FY08. The last 3months of FY11 itself saw deals worth US$ 3.3 billion. Most ofthe private equity interest this year was generated in areas likeinfrastructure, manufacturing, engineering etc.Source: Venture IntelligenceOur Private Equity BusinessThe private equity subsidiary, MOPE currently manages and advices funds in the growth capital and the real estate space.Investment ProcessNurturing ProcessMOPE is an investment manager and advisor to the India Business Excellence Fund (IBEF), which has commitments of US$ 125million (~R 550 crores) from investors in India and overseas. The fund is aimed at providing growth capital to small and mediumenterprises in India, with investments typically in the range of US$ 5-15 million. As of March 2011, the fund has made investmentsin 13 companies, and has committed 84.7% of its funds under management.MOPE was appointed as Investment Manager to India Realty Excellence Fund (IREF), a domestic real estate fund, in FY09. IREFhad its final closing in December 2009 with total assets under management/advice at R 200 crores. The fund has already madeinvestments across 6 deals till 31st March, 2011, committing about 71.3% of its funds under management. MOPE has been able tobuild a strong deal pipeline for IREF and is evaluating several investment opportunities. MOPE also organized the First Annual InvestorMeet of IREF in August 2010 in Mumbai, providing a platform for investors to interact with the investment team, MOPE’s partnerdevelopers and discuss the fund’s investment strategy.The strong investment culture within the Group of identifying companies with sustainable business models and strong managementteams has helped MOPE identify companies which can deliver good returns for the stakeholders. The company is working on raisingthe second growth capital fund, India Business Excellence Fund (IBEF-II). The track record established through successful advisorymandates of these two funds has given the company, the confidence to grow the private equity business to much bigger scale in thecoming years.30FINANCIAL STATEMENT 2010 - 2011

MANAGEMENT DISCUSSION AND ANALYSISWealth ManagementIndustry FactsDistribution of HNWI Wealth by Market (US$ Tn) Breakdown of HNWI Financial Assets, 2006-2011FSource: Capgemini Merrill Lynch World Wealth Report 2010 Source: Capgemini Merrill Lynch World Wealth Report 2010With buoyant market performance, the number of HNWIs in Indiagrew 51% to reach 126,700 in 2009. Although it is still less inabsolute terms, nevertheless the growth rate was amongst thehighest, as compared to that seen in the other BRIC countriesor the advanced countries like USA, UK.Asia Pacific has seen the second highest growth in HNWI wealthamongst regional markets, during 2006 to 2009. In terms ofabsolute values, it came third after North America and Europe in2009. With Asian economies on a fast growth phase, the regionwill witness only further wealth accumulation. The World WealthReport 2010 forecasts the proportion of equities of total HNWIfinancial assets allocation to grow from 29% to 35%, between2009 and 2011, the highest amongst any other asset classes.Comparing % growth of HNWIs (Lakhs):BRICs vs USA and UKSource: Capgemini Merrill Lynch World Wealth Report 2010Our Wealth Management BusinessThe company’s Wealth Management platform caters to High Networth and mass affluent clients through an offering called “Purple”providing a complete range of financial products best suited to client needs using an advisory model and an asset allocation approach.With assets under management of R 1,100 crores as of 31st March, 2011, and a presence across Mumbai, Delhi, Kolkata, Puneand Ahmedabad, the company believes that its holistic wealth management offering and strong relationship management skills willenable it to build a scalable and profitable wealth management business.A study done by Celent estimates that the players in the unorganized market have approximately 1.5 times the assets undermanagement of the organized sector. This presents both a challenge and an opportunity. With customer needs for products and servicesgetting more sophisticated with growing income levels, organized players will drive the consolidation within this industry.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 31

MANAGEMENT DISCUSSION AND ANALYSISOpportunities and ThreatsOpportunities● Economy is growing at healthy rate leading to investment / capital requirement● Growing Financial Services industry’s share of wallet for disposable income.● Huge market opportunity for wealth management service providers as Indian wealth management business is transforming frommere wealth safeguarding to growing wealth.● Regulatory reforms would aid greater participation by all class of investors● Leveraging technology to enable best practices and processes● Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory businessThreats● Execution risk● Slowdown in global liquidity flows● Increased intensity of competition from local and global players● Unfavorable economic conditionsStrengthsStrong Brand name‘Motilal Oswal’ is a well-established brand among retail and institutional investors in India. MOFSL believes that its brand is associatedwith high quality research and advice as well as corporate values like integrity and excellence in execution. The company has beenable to leverage its brand awareness to grow its businesses, build relationships and attract and retain talented individuals.Experienced top managementThe promoters, Mr Motilal Oswal and Mr Raamdeo Agrawal are qualified chartered accountants with over two decades of experienceeach in the financial services industry. The top management team comprises qualified and experienced professionals, with a successfultrack record. The company believes that its management’s entrepreneurial spirit, strong technical expertise, leadership skills, insightinto the market and customer needs provide it with a competitive strength, which will help to implement its business strategies.Integrated financial services providerThe broad range of offerings under Broking and Distribution, Institutional Equities, Asset Management, Wealth Management,Investment Banking, Private Equity and Principal Strategies business, helps to foresee client requirements and provide full-fledgedservices under single platform. The production and distribution of all financial products and services helps the company’s advisorsand clients to attain client’s financial objectives with best in class in-house services.Independent and insightful researchMOFSL believes that its understanding of equity as an asset class and business fundamentals drives the quality of its research anddifferentiates it from its competitors. The research team is focused on equities, derivatives and commodities. MOSL won 4 awardsat the ET-Now Starmine Analyst Awards 2010-2011 putting it amongst the Top 3 award winning brokers at the awards. It was alsoranked No. 2 by AsiaMoney Brokers Poll 2010 in the Best Local Brokerage category.One of largest distribution network - 1,644 outlets across 611 citiesMOFSL’s financial products and services are distributed through a pan-India network. The business has grown from a single locationto a nationwide network spread across 1,644 business locations operated by business associates or directly through own branchesin 611 cities and towns. This extensive distribution network provides opportunities to cross sell products and services, particularly asthe company diversifies into new business streams. In addition to the geographical spread, MOFSL also offers an online channel toservice the customers.Established leadership in Franchisee businessOne of the key strengths has been the successful establishment of the franchisee business. The company’s relationship with thefranchisees has become stronger as they grew, to become a key strength. MOFSL has multiple business partner models in franchisingand is strongly committed to growth and profitability of each of its franchisee.Strong risk managementRisk exposure is monitored and controlled through a variety of separate but complementary financial, credit, operational, complianceand legal reporting systems. Risk management department analyses this data in conjunction with the company’s risk managementpolicies and takes appropriate action where necessary to minimize risk.Financial prudenceMOFSL’s operating margins continue to remain stable despite the fluctuations in market volumes and revenues. This is a result ofcreating a robust business model that can withstand the cyclical fluctuations in business volumes and simultaneously capture theopportunities provided by the structural growth of India.32FINANCIAL STATEMENT 2010 - 2011

MANAGEMENT DISCUSSION AND ANALYSISThe company has a low gearing ratio as at 31 March 2011 which augers well to manage market volatilities. During FY11, CRISILLimited reaffirmed the rating of ‘P1+’ the highest rating, for MOFSL short term borrowing program of R 400 crores. CRISIL Limitedhas also reaffirmed the rating of ‘P1+’ to MOSL’s short term borrowing program of R 400 crores. This facility provides MOFSL theflexibility to avail funds at competitive rates when business opportunities arise.Risks and concernsThe company is primarily exposed to credit risk, interest rate risk, liquidity risk and operational risks. Internally, it has constitutedthe Asset Liability Management Committee to manage these risks. This team identifies, assesses and monitors all principal risks inaccordance with defined policies and procedures. The committee is headed by the Chairman & Managing Director.The Board Level Committees viz. Audit Committee and Risk Management Committee oversee risk management policies andprocedures. It reviews credit and operational risks while the Asset Liability Management Committee reviews policies in relation toinvestment strategy and other risks like interest rate risk and liquidity risk.Internal control systems and their adequacyThe company’s internal control systems are adequate and provide, among other things, reasonable assurance of recording transactionsof operations in all material respects and of providing protection against significant misuse or loss of company assets.Internal audit is conducted by M/s. Pricewaterhouse, to assess the adequacy of the internal controls procedures and processes, andtheir reports are reviewed by the Audit Committee of the Board. Policy and process corrections are undertaken based on inputs fromthe internal auditors.Financial and operational performanceThe financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, and GenerallyAccepted Accounting Principles (GAAP) in India.Table 1: Abridged profit and loss account (R Crores) - StandaloneParticulars 2010-2011 % to Total income 2009-2010 % to Total incomeRevenueIncome from operations 49.53 77.09 51.09 79.51Other income 14.72 22.91 13.17 20.49TOTAL 64.25 100.00 64.26 100.00ExpenditureFinancial Expenses 1.16 1.80 2.85 4.43Employee Cost 2.68 4.17 1.53 2.38Other Expenses 3.87 6.02 2.58 4.01TOTAL 7.70 11.99 6.95 10.81Profit Before Tax 56.54 88.01 57.31 89.19Tax - Current Tax & Deferred 13.89 21.61 14.91 23.21PAT 42.66 66.40 42.40 65.98Earnings per share (Basic) R 2.96 2.97Earnings per share (Diluted) R 2.96 2.97The standalone revenues for the year were R 64.25 crores, largely flat as compared to R 64.26 crores last year. Interest income wentup by 55% to R 39.66 crores, on account of an increase in the average loan book size, as well as participation in certain IPO financingtransactions for the Coal India, Powergrid and MOIL issues. Income from arbitrage operations was lower as compared to last financialyear due to lower deployment of surplus funds in arbitrage.Reduction in the Company’s average borrowing this year and capitalization of finance cost to the extent related/attributed to theacquisition/construction of qualifying fixed assets during the year led to an decrease in financial expenses. Interest and financecharges fell by 59%. i.e. from R 2.85 crores in 2009-10 to R 1.16 crores in 2010-11.Due to higher operating/personnel costs and provisioning for standard loan assets as required by the RBI, the total expensesregistered an 11% jump to R 7.70 crores this year.Profit before Tax (PBT) was down marginally by 1% from R 57.31 crores in 2009-10 to R 56.54 crores in 2010-11. Profit after Tax(PAT) was up marginally by 1%, from R 42.40 crores in 2009-10 to R 42.66 crores in 2010-11. Basic earnings per share (face valueR 1) marginally decreased from R 2.97 in 2009-10 to R 2.96 in 2010-2011.As at March 31, 2011, investments consisted principally of long-term investments, totaling R 83.26 crores. Investments haveincreased by R 25.03 crores from March 31, 2010, primarily on account of higher deployment in other investments based oncommitments given in private equity funds and acquisition of further stake in subsidiary company MOIAPL.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 33

MANAGEMENT DISCUSSION AND ANALYSISCurrent assets mainly comprised of stock in trade, cash and bank balances and other current assets. As at March 31, 2011, cashand bank balances were R 1.61 crores, of which R 1.0 crore was in fixed deposits with banks.Loans and Advances increased from R 297.11 crores as at March 31, 2010 to R 367.70 crores as at March 31, 2011, on accountof an increase in the loan book size.Current liabilities and Provisions principally consist of liability in respect of provision for expenses, tax deduction at source, proposeddividend and provision for tax. It increased from R 54.96 crores as at March 31, 2010 to R 66.61 crores as at March 31, 2011,predominantly due to an increase in provision for taxes, proposed dividend and tax thereon.Table 2: Abridged profit and loss account (R crores) - ConsolidatedParticulars 2010-2011 % to Total income 2009-2010 % to Total incomeRevenueIncome from operations 589.70 98.22 625.01 96.85Other income 10.67 1.78 20.31 3.15TOTAL 600.37 100.00 645.32 100.00ExpenditureOperating Exp. 145.52 24.24 162.97 25.25Financial Expenses 5.69 0.95 9.62 1.49Employee Cost 142.19 23.68 136.66 21.18Depreciation 13.13 2.19 14.19 2.20Administrative & other Expenses 83.11 13.84 68.72 10.65TOTAL 389.63 64.90 392.15 60.77Profit Before Tax and Exceptional Items 210.74 35.10 253.17 39.23Exceptional Items - Income / (Exp.) 0.00 0.00 0.06 0.00Profit Before Tax 210.74 35.10 253.23 39.24Current Tax 67.28 11.21 80.21 12.43Deferred Tax (Income) / Exp 3.30 0.55 (1.79) (0.28)Tax - Earlier years 0.66 0.11 0.39 0.06Profit after Tax (PAT ) 139.50 23.24 174.42 27.03Earnings per share (Basic) R 9.52 11.91Earnings per share (Diluted) R 9.52 11.90Due to volatile market conditions, the consolidated financial revenues and profitability of MOFSL has decreased.During 2010-11, MOFSL recorded a 7% decline in total revenues from R 645.32 crores in 2009-10 to R 600.37 crores in 2010-11.Total borrowings outstanding decreased from R 108.32 crores as at March 31, 2010 to Nil as at March 31, 2011. The averageborrowings during the year have also decreased as compared to last year. Decline in borrowings and capitalization of finance cost tothe extent related/attributed to the acquisition / construction of qualifying fixed assets during the year led to a decrease in financialexpenses from R 9.62 crores in 2009-10 to R 5.69 crores in 2010-11.Employee costs increased 4% from R 136.66 crores in 2009-10 to R 142.19 crores in 2010-11, mainly on account of a generalincrease in salaries and benefits and new hires. Administrative and other expenses increased from R 68.72 crores in 2009-10 toR 83.11 crores in 2010-11, mainly on account of an increase in marketing/brand promotion expenses, due to the launch of thethree mutual funds this year.The Company recorded a decline of 17% in Profit before Tax and Exceptional Items, which is down from R 253.17 crores in 2009-10to R 210.74 crores in 2010-11.Profit after Tax (PAT) is also down by 20%, from R 174.42 crores in 2009-10 to R 139.50 crores in 2010-11. Consequently, basicearnings per share decreased from R 11.91 during 2009-10 to R 9.52 during 2010-11.As at March 31, 2011, investments principally consisted of long-term investments, totaling R 58.84 crores. Investments haveincreased by R 7.43 crores from March 31, 2010, primarily on account of higher deployment of other investments in private equityfunds.Current assets mainly comprised of sundry debtors, stock-in-trade, cash and bank balances, and other current assets. As at March31, 2011, cash and bank balances were R 266.51 crores, of which R 185.52 crores was in fixed deposits.Loans and Advances increased from R 493.74 crores as at March 31, 2010 to R 616.08 crores as at March 31, 2011, mainly onaccount of an increase in the loan book size.34FINANCIAL STATEMENT 2010 - 2011

MANAGEMENT DISCUSSION AND ANALYSISCurrent liabilities principally consist of current liabilities in connection with margin monies deposited by customers to facilitate tradingon their behalf and amounts payable to customers on whose behalf we undertake trades as well as amounts payable to exchanges.It increased from R 539.61 crores to R 560.77 crores as at March 31, 2011. Provisions include provision for taxation and provisionfor proposed dividend, which decreased from R 240.51 crores to R 233.08 crores.Performance of SubsidiariesMotilal Oswal Securities Limited (MOSL)(R in crores)Particulars FY11 FY10 Growth (YoY)As on Mar 31, 2011 As on Mar 31, 2010Total Revenues 487.1 515.9 -6%EBIDTA 166.7 192.7 -14%PBT 149.0 172.2 -14%PAT 100.8 119.2 -15%Motilal Oswal Private Equity Advisors Pvt. Ltd. (MOPEAPL)Particulars FY11 FY10 Growth (YoY)As on Mar 31, 2011 As on Mar 31, 2010Total Revenues 12.8 15.4 -17%EBIDTA 3.4 3.9 -11%PBT 3.3 3.7 -11%PAT 2.3 2.5 -9%Motilal Oswal Investment Advisors Pvt. Ltd. (MOIAPL)Particulars FY11 FY10 Growth (YoY)As on Mar 31, 2011 As on Mar 31, 2010Total Revenues 41.8 65.5 -36%EBIDTA 19.7 32.8 -40%PBT 19.6 32.6 -40%PAT 13 21.7 -40%Motilal Oswal Commodities Broker Pvt. Limited (MOCBPL)Particulars FY11 FY10 Growth (YoY)As on Mar 31, 2011 As on Mar 31, 2010Total Revenues 9.6 6.4 50%EBIDTA 3.9 1.9 103%PBT 3.8 1.7 124%PAT 2.5 1.3 94%Motilal Oswal Asset Management Company Limited (MOAMC)Particulars FY11 FY10 Growth (YoY)As on Mar 31, 2011 As on Mar 31, 2010Total Revenues 19.5 0.5 4041%EBIDTA (8.4) (5.9) -43%PBT (8.5) (5.9) -45%PAT (8.5) (4.1) -108%Segment Wise PerformanceThe Company’s operation predominantly relate to equity broking and other related activities, financing and other activities & investmentbanking. Below table shows performance of equity broking and other related activities, financing and other activities & investmentbanking.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 35

MANAGEMENT DISCUSSION AND ANALYSISParticularsYear Ended31.03.2011(R in Crores)Year Ended31.03.20101. Segment Revenue(a) Equity Broking & Other related activities 482.99 501.30(b) Financing & Other activities 50.84 55.90(c) Investment Banking 40.52 65.03(d) Unallocated 48.93 37.96TOTAL 623.28 660.19Less: Inter Segment Revenue 22.91 14.87Income From Operations, Other Operating income & Other Income 600.37 645.322. Segment Results Profit / (Loss) before tax and interest from each segment(a) Equity Broking & Other related activities 149.55 164.50(b) Financing & Other activities 43.14 48.95(c) Investment Banking 18.32 32.17(d) Unallocated 5.24 14.72TOTAL 216.25 260.34Less: Interest 5.51 7.17Profit / (Loss ) from Ordinary Activities before Exceptional Items & Tax 210.74 253.173. Capital Employed (Segment assets – Segment Liabilities)(a) Equity Broking & Other related activities 518.42 478.57(b) Financing & Other activities 541.49 494.17(c) Investment Banking 10.50 5.00(d) Unallocated (10.90) (31.76)TOTAL 1,059.51 945.98Human ResourcesWe believe that an engaged employee is a more productive and empowered employee. Health of the employees was of prime focusin the last financial year. A Doctor@Work programme has been initiated, wherein a doctor visits the corporate offices twice a week.This was initiated keeping in mind the employee’s convenience and to ensure that the employee keeps a check on his / her health,while not having to miss office. Employee health camps were organized Pan India where blood tests, health talks, dietician sessionswere conducted. Throughout the year various health check up camps such as vision screening, audiometry, skin analysis, dentalcheck were conducted. Yoga and aerobics classes are held twice a week, apart from the gym being available to all employees. Someinnovative sessions such as Tai-chi and Salsa were organized to introduce employees to new forms of exercise in a fun way.An important initiative we continue to associate with till date is the Employee Assistance Programme called Wellness and Wellbeingwith ICAS India. It is a counselling service for Pan India employees, which also extends to their families, and is completely confidential.The service aims at addressing the employees’ emotional needs and assists them to stay emotionally and mentally stress-free andhealthy.Sports events such as cricket, badminton, carom were organized to promote team-bonding and a healthy competitive spirit in whichemployees whole-heartedly participate.All major festivals such as Diwali, Navratri, Christmas, Holi are celebrated across the Group with great enthusiasm.In our endeavour to recognize and reward superior employee performance, employee awards are presented across various categoriesat the Foundation Day function. The process of deciding the winners is well evolved and democratic; one that gives each departmenta fair platform to recognize high performers.Cautionary statementCertain statements in the Management Discussion and Analysis describing the Company’s objectives, predictions may be “forwardlookingstatements” within the meaning of applicable laws and regulations. Actual results may vary significantly from the forwardlookingstatements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effectof economic and political conditions in India, volatility in interest rates, new regulations and government policies that may impact theCompany’s business as well as its ability to implement the strategy. The Company does not undertake to update these statements.36FINANCIAL STATEMENT 2010 - 2011

CORPORATE GOVERNANCECorporate Governance PhilosophyThe philosophy on corporate governance is an important tool for shareholder protection and maximization of their long termvalues. It has been a constant endeavour on the part of the Company to achieve excellence in Corporate Governance byfollowing the principles of transparency, accountability and integrity in functioning, so as to constantly striving to enhance valuefor all stakeholders and the society in general. As a good corporate citizen, the Company is committed to sound corporatepractices based on conscience, openness, fairness, professionalism and accountability in building confidence of its variousstakeholders in it thereby paving the way for its long term success. We are making continuous efforts to adopt the bestpractices in corporate governance and we believe that the practices we are putting into place for the company shall go beyondadherence to regulatory framework. The cardinal principles such as independence, accountability, responsibility, transparencyserve as the means for implementing the philosophy of corporate governance in letter and spirit.This chapter, along with the chapters on Management Discussion and Analysis and General Shareholders’ Information, reportsthe Company’s compliance with the Clause 49 of the listing agreement with the Stock Exchanges.Board of DirectorsThe Board consists of seven members, out of which two members hold Executive positions and five Members hold Non-Executive positions. Out of the five Non-Executive Directors four are Independent Directors. The Company has an ExecutiveChairman, and thus, more than 50% of the total number of Directors are Independent. The management of the Companyis headed by the Chairman & Managing Director who operates under the supervision and control of the Board. The Boardreviews and approves strategy and oversees the actions and results of management to ensure that the long-term objectivesof enhancing stakeholder value are met.Mr. Motilal Oswal, Mr. Raamdeo Agrawal and Passionate Investment Management Private Limited are the Promoters of theCompany.Mr. Navin Agarwal, the Non-Executive Director of your Company is in the whole-time employment of Motilal Oswal SecuritiesLimited (hereinafter referred to as MOSL), a material unlisted subsidiary of the Company, and draws remuneration from MOSL.Apart from the reimbursements of expenses incurred in discharge of their duties and the remuneration that the IndependentDirectors would be entitled to receive under the Companies Act, 1956, none of the Independent Directors has any othermaterial pecuniary relationship or transactions with the Company, its Promoters, its Directors, its Management, its subsidiaryand its Associates which in their judgment would affect their independence. There are no inter-se relationships amongst ourBoard of Directors.The Senior Management have made disclosures to the Board confirming that there are no material, financial and/or commercialtransactions between them and the Company which could have potential conflict of interest with the Company at large.Number of Board MeetingsThe Board of Directors met four times during the year ended 31st March, 2011, on 27th April, 2010, 23rd July, 2010, 20thOctober, 2010 and 28th January, 2011. The maximum gap between any two meetings was not more than four months. AllMeetings were well attended.Directors’ Attendance Record and Directorships HeldAs mandated by the Clause 49, none of the Directors are members of more than ten Board level Committees nor are theyChairman of more than five Committees in which they are members.Composition of the BoardAs at 31st March, 2011, the Company’s Board comprised of seven members. Mr. Motilal Oswal, Chairman of the Board isthe Managing Director of the Company, Mr. Raamdeo Agrawal is the Joint Managing Director of the Company and five othermembers are Non-Executive Directors. The names and categories of Directors, their attendance at the Board Meetings heldduring the year and at the last Annual General Meeting (AGM) of the Company which was held on 24th July, 2010 as also thenumber of Directorships and Committee positions held by them in companies are given herein below :-MOTILAL OSWAL FINANCIAL SERVICES LIMITED 37

CORPORATE GOVERNANCEDetails of the composition of the Board, number of Board Meetings held and the attendance of the Directors thereat:Name of the DirectorsCategoryNumber ofBoard meetingsHeldAttendedAttendance at thePrevious AGMNumber of Directorships and CommitteeMembership / ChairmanshipDirectorships$CommitteeMembership $$CommitteeChairmanship $$Mr. Motilal OswalMr. Raamdeo AgrawalMr. Navin AgarwalChairman &Managing Director(Promoter)Joint ManagingDirector(Promoter)Non-independentNon-executive4 4 Yes 6 1 –4 4 Yes 6 2 –4 4 Yes 3 – –Mr. Ramesh Agarwal Independent 4 4 Yes 2 1 –Mr. Madhav Bhatkuly Independent 4 4 Yes 2 1 –Mr. Balkumar Agarwal Independent 4 4 Yes 5 – 3Mr. Vivek Paranjpe Independent N.A. N.A. N.A. 1 – –$ Includes Directorships in Motilal Oswal Financial Services Limited (MOFSL) but excludes Directorships in private limitedcompanies, foreign companies, companies registered under Section 25 of the Companies Act, 1956.$$ For the purpose of Clause 49, the Committees considered are Audit Committee and Shareholders / Investors GrievanceCommittee of Public Limited Companies including in MOFSL.Information supplied to the BoardThe Company sends a detailed agenda folder to each Director sufficiently before Board and Committee meetings. To enablethe Board to discharge its responsibilities effectively, the Managing Director apprises the Board at every meeting on the overallperformance of the Company, followed by the detailed presentation.A detailed functional report is also placed at Board Meetings. The Board provides the overall strategic direction and periodicallyreviews strategy and business plans, annual operating and capital expenditure budgets and oversees the actions and resultsof the management to ensure that the long term objectives of enhancing shareholders’ value are met. The Board also, interalia, considers and reviews investment and exposure limits, adoption of quarterly / half-yearly / annual results, transactionspertaining to purchase / disposal of property, major accounting provisions and write-offs, minutes of meetings of the Audit andother Committees of the Board and information on recruitment of officers just below the Board level, including the ComplianceOfficer.The Board periodically reviews compliance reports of all laws applicable to the Company, as well as steps taken by theCompany to rectify instances of non-compliances, if any. In addition to the above, pursuant to the Clause 49, the minutes ofthe Board meetings of your Company’s subsidiaries and a statement of all significant transactions and arrangements enteredinto by the subsidiaries are also placed before the Board.Remuneration PolicyThe success of the organisation in achieving good performance and good governing practice depends on its ability to attractand retain individuals with requisite knowledge and excellence as Executive and Non-Executive Directors. With this objective,the Board, Remuneration/Compensation Committee decides on the remuneration to be paid to the Non-Executive Directors.While deciding on the remuneration to the Directors, the Board and Remuneration / Compensation Committee considers theperformance of the Company, the current trends in the industry, the qualifications of the appointee, his experience, level ofresponsibility, past performance and other relevant factors.38FINANCIAL STATEMENT 2010 - 2011

CORPORATE GOVERNANCERemuneration paid to Non-Executive DirectorsThe Non-Executive Directors are paid a sitting fee of R 20,000 for every Meeting of the Board and R 10,000 for every meetingof the Committees of the Board attended by them. No sitting fee is paid to Mr. Navin Agarwal, the Non-independent Non-Executive Director of the Company.During, 2010-2011 the Company did not advance any loans to any of its Directors.Details of the Sitting Fees & Commission paid to the Non-executive Directors during the year ended 31st March, 2011 :-Name of the Directors Category Sitting Fees (R) Commission (R)Mr. Navin Agarwal Non-independent Non-executive Nil NilMr. Ramesh Agarwal Independent 150,000 400,000Mr. Madhav Bhatkuly Independent 120,000 400,000Mr. Balkumar Agarwal Independent 150,000 400,000Mr. Vivek Paranjpe Independent Nil 100,000No Stock Option was granted to the Directors during the year ended 31st March, 2011.Remuneration to the Chairman & Managing Director and to Joint Managing DirectorNo remuneration is paid to Mr. Motilal Oswal, Chairman & Managing Director during the financial year 31st March, 2011.Mr. Oswal till 31st March, 2011 was also designated as the Chairman & Managing Director of Motilal Oswal Securities Limited(MOSL), a Material Non-listed Indian Subsidiary of the Company and drew remuneration from MOSL.Mr. Raamdeo Agrawal – Joint Managing Director received a remuneration of R 1,00,00,000 from the Company for theperiod 1st November, 2010 to 31st March, 2011. Mr. Agrawal till 30th September, 2010 was also designated as the JointManaging Director of Motilal Oswal Securities Limited (MOSL), a Material Non-listed Indian Subsidiary of the Company anddrew remuneration from MOSL till 30th September, 2010.Shares held by the Non-Executive DirectorsDetails of the Equity Shares of the Company held by the Non-Executive Directors as on 31st March, 2011.Name of the Directors Category Number of Equity Shares of R 1 each heldMr. Navin Agarwal Non-independent Non-executive 78,04,010Mr. Ramesh Agarwal Independent NilMr. Madhav Bhatkuly Independent NilMr. Balkumar Agarwal Independent NilMr. Vivek Paranjpe Independent NilCode of ConductThe Board has laid down the Code of Conduct for its members and for designated Senior Management Personnel of theCompany. The Code has been posted on the Company’s website www.motilaloswal.com. All Board members and SeniorManagement Personnel have affirmed compliance with the Code of Conduct. A declaration signed by the Chief ExecutiveOfficer, Chairman & Managing Director to this effect is enclosed at the end of this report.CEO / CFO CertificationAs required under Clause 49 V of the Listing Agreement with the Stock Exchanges, Mr. Motilal Oswal, Chief Executive Officerand Chief Financial Officer of the Company has certified to the Board regarding the Financial Statements for the financial yearended 31st March, 2011.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 39

CORPORATE GOVERNANCERisk ManagementThe Company has a well-defined risk management framework in place. The risk management framework adopted by theCompany is discussed in the Management Discussion and Analysis chapter of this Annual Report. The Board assesses the riskand the procedures being followed by the Company and steps taken by it to mitigate these risks.The Board has also constituted a Risk Management Committee and Asset Management Liability Committee, which ensure thatthe management controls risks through means of a properly defined framework.Committees of the BoardYour Company has five major Board level Committees –i) Audit Committee;ii) Shareholders / Investors Grievance Committee;iii) Remuneration / Compensation Committee;iv) Nomination Committee; andv) Risk Management Committee.All decisions pertaining to the constitution of the Committees, appointment of members and fixing of terms of reference forthe Committee is taken by the Board of Directors. Details on the role and composition of these Committees, including thenumber of meetings held during the financial year and the attendance of the members at these meetings, are provided below:i. Audit CommitteeAs on 31st March, 2011, the Audit Committee comprised of one Executive Director and three Non-Executive Directors,of which all three are Independent. The Committee comprises of:-i) Mr. Balkumar Agarwal, Independent Director (Chairman),ii) Mr. Ramesh Agarwal, Independent Director,iii) Mr. Madhav Bhatkuly Independent Director, andiv) Mr. Raamdeo Agrawal, Executive Director.The terms of reference of this Committee are very wide. Besides having access to all the required information from withinthe Company, the Committee can obtain external professional advice whenever required. The Committee acts as a linkbetween the Statutory and the Internal Auditors and the Board of Directors of the Company. It is authorised to selectand establish accounting policies, review reports of the Statutory Auditors and the Internal Auditors and meet with themto discuss their findings, suggestions and other related matters. The Committee is empowered to review, inter alia, theremuneration payable to the Statutory Auditors and to recommend a change in Auditors, if felt necessary. It is alsoempowered to review Financial Statements and investments of unlisted subsidiary companies, Management Discussion& Analysis, Material individual transactions with related parties not in normal course of business or which are not onan arm’s length basis. Generally all items listed in Clause 49 II D of the Listing Agreement are covered in the terms ofreference. The Audit Committee has been granted powers as prescribed under Clause 49 II C of the Listing Agreement.Mr. Balkumar Agarwal, the Chairman of the Committee was present at the previous Annual General Meeting of theCompany.The Audit Committee met four times during the year on 27th April, 2010, 23rd July, 2010, 20th October, 2010 and 28thJanuary, 2011. The time gap between any two meetings was less than four months. The details of the Composition of theCommittee, number of meetings held and the attendance of the Directors thereat is given herein below:-Name of the members Category StatusNo. of meetingsHeld AttendedMr. Balkumar Agarwal Independent Chairman 4 4Mr. Ramesh Agarwal Independent Member 4 4Mr. Raamdeo Agrawal Executive Member 4 4Mr. Madhav Bhatkuly Independent Member 4 440FINANCIAL STATEMENT 2010 - 2011

CORPORATE GOVERNANCEMr. Motilal Oswal (Chairman & Managing Director, Chief Executive Officer and the Chief Financial Officer), Internal Auditorsand Statutory Auditors attend the Audit Committee meetings. The Company Secretary is the Secretary to the Committee.All the members of the Audit Committee possess strong accounting and financial management expertise.ii.Remuneration / Compensation CommitteeAs of 31st March, 2011, the Remuneration / Compensation Committee comprised of 3 members. The Committeecomprises of:-i) Mr. Ramesh Agarwal, Independent Director, (Chairman);ii) Mr. Balkumar Agarwal, Independent Director; andiii) Mr. Motilal Oswal, Chairman & Managing Director.The terms of reference of the Remuneration / Compensation Committee is to look into the entire gamut of remunerationpackage for the Executive Director(s) and revise their remuneration suitably within the limits prescribed under theCompanies Act, 1956, decide on commission payable to the Directors within the prescribed limits and as approved by theshareholders of the Company and to formulate and administer Employees’ Stock Option Schemes.The Committee met three times during the year under review on, 27th April, 2010, 20th October, 2010 and 28th January,2011. The details of the Composition of the Committee, number of meetings held and the attendance of the Directorsthereat is given herein below:-Name of the members Category StatusNo. of meetingsHeldAttendedMr. Ramesh Agarwal Independent Chairman 3 3Mr. Balkumar Agarwal Independent Member 3 3Mr. Motilal Oswal Chairman & Managing Director Member 3 3iii. Shareholders / Investors Grievance CommitteeThe Company’s Shareholders/Investors Grievance Committee comprises of the following 3 members:-i) Mr. Balkumar Agarwal, Independent Director, (Chairman)ii) Mr. Motilal Oswal, Chairman & Managing Director andiii) Mr. Raamdeo Agrawal, Non-Executive Director.Mr. Samrat Sanyal, Company Secretary is the Compliance Officer.The Committee meets as and when required, to deal with the investor related matters etc.Details of queries and grievances received and attended to by the Company during the year 2010-2011 are given hereinbelow: -S.No.Nature of complaintPending as on1st April, 2010Received duringthe yearPending as on31st March, 2011i. SEBI / Stock Exchange Complaints – 1 –ii. Non-receipt of Dividend warrant – 9 –iii. Non-receipt of Annual Report – – –iv. Others – – –TOTAL – 10 –MOTILAL OSWAL FINANCIAL SERVICES LIMITED 41

CORPORATE GOVERNANCEiv. Nomination CommitteeThe Nomination Committee comprises of 2 members - Mr. Motilal Oswal, Chairman & Managing Director and Mr. RaamdeoAgrawal, Joint Managing Director.The Committee was constituted in accordance with the Corporate Governance guidelines promulgated by the ReserveBank of India and is primarily responsible to assist the Board of Directors in fulfilling its responsibilities by recommendingto the Board the composition and structure of the Board, criteria for Board membership, evaluation of the corporatepolicies relating to the recruitment of Board members and to establish, implement and monitor policies and processesregarding principles of corporate governance.v. Risk Management CommitteeThe Risk Management Committee comprises of 2 members - Mr. Motilal Oswal, Chairman & Managing Director andMr. Navin Agarwal, Non-Executive Director.The Risk Management Committee is required to manage the integrated risk and inform the Board from time to time theprogress made in putting in place a progressive risk management system, risk management policy and strategy followedby the Company.Subsidiary CompaniesClause 49 defines a “Material Non-listed Indian subsidiary” as an unlisted subsidiary, incorporated in India, whose turnoveror net worth (i.e. paid-up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectively,of the listed holding company and its subsidiaries in the immediately preceding accounting year. Under this definition, theCompany has one ‘Material Non-listed Indian subsidiary’ i.e. Motilal Oswal Securities Limited (MOSL). As on 31st March,2011 Mr. Ramesh Agarwal, an Independent Director on the Board of the Company is also a Director on the Board of MOSL.ManagementManagement Discussion and AnalysisAnnual Report has a detailed chapter on Management Discussion and Analysis.Disclosures:i) There have been no materially significant transactions, pecuniary transactions or relationships between the Company andDirectors, management, subsidiaries or related parties except those disclosed in the financial statements for the yearended 31st March, 2011. Further the details of the Related Party Transactions are presented in the Notes to Accounts.ii) The Company has complied with all the requirements of regulatory authorities. No penalties / strictures were imposedon the Company by stock exchanges or SEBI or any statutory authority on any matter related to capital market since thelisting of the Company’s equity shares.iii) The Company has complied with the mandatory requirements of Clause 49.iv) The Company has complied with the following non-mandatory requirements as prescribed in Annexure I D to Clause 49 ofthe Listing Agreement: -a) The Company has set up a Remuneration / Compensation Committee long before it got listed. Please see the sectionon Remuneration / Compensation Committee for details.b) The financial statements of the Company are unqualified.Disclosure of Accounting Treatment in Preparation of Financial StatementsThe Company has followed the Guidelines of Accounting Standards laid down by the Institute of Chartered Accountants of India(ICAI) in preparation of its financial statements.Code for Prevention of Insider-Trading PracticesIn compliance with the provisions of the Securities and Exchange Board of India (Prohibition of Insider Trading Regulations),1992 (SEBI Regulations), the Company has framed a comprehensive Code of Conduct for prevention of Insider Trading for itsdesignated employees. The Code lays down guidelines, which advises them on procedures to be followed and disclosures tobe made, while dealing with shares of the Company, and cautioning them of the consequences of violations.42FINANCIAL STATEMENT 2010 - 2011

CORPORATE GOVERNANCEShareholdersRe-appointment of DirectorsPursuant to the Articles of Association of the Company, at every Annual General Meeting of the Company, one-third of therotational Directors retire by rotation.Mr. Ramesh Agarwal and Mr. Madhav Bhatkuly, Independent Directors retire by rotation at the forthcoming Annual GeneralMeeting and due to their respective preoccupations do not offer themselves for re-appointment.The Board of Directors re-appointed Mr. Motilal Oswal as the Managing Director of the Company, for a further period of 5 years,with effect from 18th January, 2011, subject to the approval of the Members at the forthcoming Annual General Meeting ofthe Company.Mr. Vivek Paranjpe was appointed as an Additional Director on 28th January, 2011 by the Board of Directors. It would berequired to appoint him as a Director by the Members at the forthcoming Annual General Meeting. The details of Mr. VivekParanjpe is as under :-Appointment of Mr. Vivek Paranjpe as an Independent DirectorMr. Paranjpe, has a very rich experience of over 34 years in all facets of Human Resources and Strategic Management in theglobal environment. He also has extensive experience of leading and managing high caliber teams of professionals of severalnationalities. He has worked in areas of Development of People like Executive Coaching to improve Organisation effectiveness.He also has hands on experience of Strategic planning, Culture Building, Organisation structures, Business excellence / Qualityinterventions.He is presently engaged as consultant in Companies like Reliance Industries, Blackstone Advisors, Forbes etc.It is proposed to appoint Mr. Paranjpe as the Director by the members of the Company in the forthcoming Annual GeneralMeeting of the Company.Name of DirectorMr. Vivek ParanjpeDate of Birth 8th September, 1952Date of Appointment on the Board 28th January, 2011Expertise in specific functional areaHuman Resource DevelopmentQualificationsB. Sc. (Hons); Postgraduate Honours Diploma in IndustrialRelations & Welfare (XLRI, Jamshedpur)Directorships in Public Limited CompaniesMotilal Oswal Financial Services LimitedShareholding of Director in the CompanyNilMembership of Committees in Public Limited CompaniesAudit Committee NilShareholders / Investors Grievance Committee NilRemuneration / Compensation Committee NilMeans of Communication with ShareholdersThe Company publishes quarterly, half-yearly and annual results in national and local dailies. The Company’s results and officialnews releases are displayed on the Company’s website http://www.motilaloswal.com. Presentations made to the investors andanalysts are also put-up on its website. The Company has also a designated E-mail id, namely investors@motilaloswal.comfor the purpose of registering complaints by investors. The E-mail id is displayed on the Company’s website.General Body MeetingsThe details of the Annual General Meetings held during past three years are given herein below:-●The Third Annual General Meeting of the Company was held on Tuesday, 8th July, 2008 at 2.00 p.m. at Y. B. ChavanCentre, General Jagannathrao Bhosale Marg, Next to Sachivalaya Gymkhana, Nariman Point, Mumbai - 400 021.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 43

CORPORATE GOVERNANCE●●The Fourth Annual General Meeting of the Company was held on Saturday 1st August, 2009 at 1.30 p.m. at IndianEducation Society’s Manik Sabhagriha, ‘Vishwakarma’ M. D. Lotlikar Vidya Sankul, Opp. Lilavati Hospital, BandraReclamation, Bandra (West), Mumbai – 400 050.The Fifth Annual General Meeting of the Company was held on Saturday, 24th July, 2010 at 10.00 a.m. at Y. B. ChavanCentre, General Jagannathrao Bhosale Marg, Nariman Point, Mumbai - 400 021.Year Date Time Special Resolutions passed2008 8th July, 2008 2.00 p.m. 1. Alteration of the Articles of Association of the Company consequent uponthe sub-division of equity shares of R 5 each into R 1 each.2. Approval of ‘Motilal Oswal Financial Services Limited – Employees’ StockOption Scheme – VI’.3. Authority to extend the benefits of the ‘Motilal Oswal Financial ServicesLimited – Employees’ Stock Option Scheme – VI’ to the employees of theSubsidiaries of the Company.2009 1st August, 2009 1.30 p.m 1. Issue of 989066 Equity Shares of R 1 each at a premium of R 137.74 pershare on preferential basis as a purchase consideration for acquisition of62,500 Equity Shares of Motilal Oswal Investment Advisors Pvt. Ltd.2010 24th July, 2010 10.00 a.m 1. Issue of 984463 Equity Shares of R 1 each at a premium of R 166.93 pershare on preferential basis as a purchase consideration for acquisition of62,500 Equity Shares of Motilal Oswal Investment Advisors Pvt. Ltd.No resolution is proposed to be passed through Postal Ballot.General Shareholder Information(i) Details of the 6th Annual General Meeting of the Company:-Date : Thursday, 21st July, 2011Time : 4:00 p.m.Venue : “Rama Watumull Auditorium, K. C. College”,124, Dinshaw Wachha Road, Churchgate, Mumbai - 400 020.(ii) Financial year of the CompanyThe financial year covers the period from 1st April to 31st March.Calendar for the financial year ending 31st March, 2011: -Financial reporting for theTentative dates of the Board MeetingFirst quarter ending 30th June, 2011 Second fortnight of July 2011Half year ending 30th September, 2011 First fortnight of October 2011Third quarter ending 31st December, 2011 First fortnight of January 2012Year ending 31st March, 2012 Second fortnight of April 2012Annual General Meeting for the year ending 31st March, 2012 is likely to be held in the second fortnight of July 2012.(iii) Date of Book ClosureFrom 13th July, 2011 to 21st July, 2011, inclusive of both days.(iv) Dividend Payment DateSubject to the approval of the members, the dividend of R 1.40 per share recommended by the Board will be paid on orbefore 10th August, 2011.44FINANCIAL STATEMENT 2010 - 2011

CORPORATE GOVERNANCE(v) Listing on Stock ExchangesThe Company’s Shares are listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited(NSE). The requisite listing fees for 2011-2012 have been paid in full to BSE and NSE.(vi) Stock Code / ISIN No.BSE : 532892NSE : MOTILALOFSDemat International Security Identification Number (ISIN) in NSDL and CDSL for equity shares: INE338I01027.(vii) Market Price DataHigh, low during each month in the last financial year at BSE and NSE:-Month BSE (R) NSE (R)High Low High LowApril 2010 186.00 135.35 186.70 159.00May 2010 177.65 162.10 178.00 161.25June 2010 179.15 155.00 177.90 139.00July 2010 187.30 159.00 187.85 163.00August 2010 171.50 151.00 170.50 150.25September 2010 183.85 151.10 182.15 135.70October 2010 231.50 179.30 231.70 178.20November 2010 207.70 146.05 207.50 145.05December 2010 188.00 152.00 189.85 154.00January 2011 181.70 134.00 182.00 134.25February 2011 144.00 117.50 149.00 116.25March 2011 143.00 120.00 154.70 119.00(viii) Performance in comparison to broad-based indices such as BSE Sensex, S&P CNX Nifty, etc.:The Company is the constituent of the BSE – 500. The performance of the Company’s shares relative to the BSE Sensex,BSE – 500 and S&P CNX Nifty is given in the chart below:-MOFSL Share performance versus BSE SensexMOTILAL OSWAL FINANCIAL SERVICES LIMITED 45

CORPORATE GOVERNANCEMOFSL Share performance versus BSE – 500MOFSL Share performance versus S&P CNX Nifty(ix) Registrar and Transfer AgentLink Intime India Private Limited(formerly Intime Spectrum Registry Limited)Unit: Motilal Oswal Financial Services LimitedC- 13, Pannalal Silk Mills Compound, LBS Marg,Bhandup (West), Mumbai – 400 078.Tel: +91 22 2596 38 38Fax: +91 22 2594 69 69E-mail: isrl@linkintime.co.inWebsite: www.linkintime.co.inThe Registrars and Transfer Agent also have an office at:Link Intime India Private LimitedUnit: Motilal Oswal Financial Services Limited203, Davar House, 197/199 Next to Central Cameras,D. N. Road, Fort, Mumbai - 400 001.Tel.: +91 22 2269 41 27Fax: +91 22 2269 41 27.(x) Share Transfer SystemTrading in Equity Shares of the Company is permitted only in dematerialised form. Shares sent for transfer in physicalform are registered and returned within a period of thirty days from the date of receipt of the documents, provided thedocuments are valid and complete in all respects. With a view to expediting the process of share transfers Mr. Motilal46FINANCIAL STATEMENT 2010 - 2011

CORPORATE GOVERNANCEOswal, Mr. Raamdeo Agrawal, Mr. Samrat Sanyal and Mr. Shalibhadra Shah are severally authorised to approve transfersof upto 50,000 equity shares per transfer, provided that the transferee does not hold 5,00,000 or more equity shares. TheShareholders / Investors Grievance Committee meets as and when required to consider the other transfer, transmissionof shares etc. and attend to shareholder grievances.(xi) Distribution of ShareholdingDistribution of the shareholding of the equity shares of the Company by size and by ownership class as on 31st March,2011.Shareholding pattern by size as on 31st March, 2011: -Number of shares held Number of shareholders Total No. of shares held in the category % of shareholding1 – 500 13664 1184585 0.82501 – 1000 325 234661 0.161001 - 2000 163 221129 0.152001 - 3000 72 174244 0.123001 - 4000 34 118620 0.084001 - 5000 34 162633 0.115001 - 10000 52 386899 0.2710001 & Above 134 141936458 98.29TOTAL 14478 144419229 100Shareholding pattern by ownership class as on 31st March, 2011 : -Sr. No. Description Number of Shares (as at % to capital31st March, 2011)(i) Promoters & promoter group 99887250 69.16(ii) Mutual Funds / Financial Institutions / Banks /17431081 12.07Foreign Institutional Investors(iii) NRIs / OCBs 9543174 6.61(iv) Bodies Corporate 567663 0.39(v) Public 9113726 6.31(vi) Directors 7804010 5.41(vii) Others 72325 0.05TOTAL 144419229 100.00(xii) Dematerialisation of SharesAs on 31st March, 2011, 99.14% of the total equity share capital was held in dematerialised form with National SecuritiesDepository Limited and Central Depository Services (India) Limited. The market lot is one share as the trading in equityshares of the Company is permitted only in dematerialised form. Other than the capital, which is, locked for the specifiedperiods, the stock is liquid.(xiii) Outstanding GDRs/ADRs/Warrants or any Convertible instruments, conversion date and likely impact on equity:As on 31st March, 2011, the Company did not have any outstanding GDRs / ADRs / Warrants or any Convertibleinstruments (excluding ESOPs).(xiv) Plant Locations:The Company is in the business of providing financial services, therefore, it does not have any manufacturing plants.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 47

CORPORATE GOVERNANCE(xv) Address for CorrespondenceShareholders may correspond with the Registrars and Transfer Agent, at the address mentioned hereinabove on allmatters relating to non-receipt of share application money and non-credit of shares in demat account and any other queryrelating to shares of the Company. Shareholders would have to correspond with the respective Depository Participants forshares held in demat mode.For all investor related matters, Company Secretary & Compliance Officer can be contacted at the Registered Office of theCompany at: -Motilal Oswal Financial Services LimitedPalm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,Malad (West), Mumbai-400 064.Tel.: +91-22-3080 10 00 Fax:. +91-22-2844 90 44e-mail: investors@motilaloswal.comThe Company can also be visited at its website http://www.motilaloswal.com48FINANCIAL STATEMENT 2010 - 2011

CHIEF EXECUTIVE OFFICER’S DECLARATION ON CODE OF CONDUCTAs required by Clause 49 of the Listing Agreement, the CEO declaration for Code of Conduct is given below:ToThe Members ofMotilal Oswal Financial Services LimitedI, Motilal Oswal, Chief Executive Officer, Chairman & Managing Director of the Company declare that all Board Members andSenior Management of the Company have affirmed compliance with the Code of Conduct.Motilal Oswal Financial Services LimitedMotilal OswalChief Executive Officer,Chairman & Managing DirectorMumbai, 30th April, 201149FINANCIAL STATEMENT 2010 - 2011MOTILAL OSWAL FINANCIAL SERVICES LIMITED 49

CERTIFICATE FROM CHIEF EXECUTIVE OFFICE AND CHIEF FINANCIAL OFFICERThe Board of DirectorsMotilal Oswal Financial Services Ltd.Dear Sirs,I have reviewed the financial statements and the cash flow statement of Motilal Oswal Financial Services Ltd. along with itssubsidiaries for the year ended 31st March, 2011 and that to the best of my knowledge and belief:●●●●these statements do not contain any materially untrue statement or omit any material fact or contain statements thatmight be misleading;these statements together present a true and fair view of the Company’s affairs and are in compliance with existingaccounting standards, applicable laws and regulations.there are, to the best of my knowledge and belief, no transactions entered into by the Company during the year which arefraudulent, illegal or violative of the Company’s Code of Conduct.I accept responsibility for establishing and maintaining internal controls for financial reporting and I have evaluated theeffectiveness of internal control systems of the Company pertaining to financial reporting and have disclosed to theAuditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which I amaware and the steps I have taken or propose to take to rectify these deficiencies.● I have indicated to the Auditors and the Audit Committee:(i) significant changes in internal control over financial reporting during the year;(ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to thefinancial statements; and(iii) instances of significant fraud of which I might be aware and the involvement therein, if any, of the management or anemployee having a significant role in the Company’s internal control system over financial reporting.Thanking youYours faithfully,Motilal OswalChairman & Managing DirectorChief Executive Office and Chief Financial Officer30th April, 201150FINANCIAL STATEMENT 2010 - 2011

AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCEToThe Members of Motilal Oswal Financial Services LimitedWe have examined the compliance of conditions of Corporate Governance by Motilal Oswal Financial Services Limited (“theCompany”) for the year ended March 31, 2011, as stipulated in Clause 49 of the Listing Agreement of the said Company withStock Exchanges.The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limitedto procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of theCorporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.In our opinion and to the best of our information and according to the explanations given to us and the representations madeby the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated inthe abovementioned Listing Agreement.We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency oreffectiveness with which the management has conducted the affairs of the Company.For and on behalf of Haribhakti & Co.Chartered AccountantsFRN No. 103523WPartner: Rakesh RathiMembership No. 45228Place: MumbaiDated: 30th April, 2011MOTILAL OSWAL FINANCIAL SERVICES LIMITED 51

OTHER INFORMATIONConstituents of ‘Group’ as defined in MRTP Act, 1969 for the purposes of SEBI (SAST) Regulations,1997Persons constituting group within the definition of “group” as defined in the Monopolies and Restrictive Trade Practices Act,1969, for the purpose of Regulation 3(1)(e) of the Securities and Exchange Board of India (Substantial Acquisition of Sharesand Takeovers) Regulations, 1997, include the following:Sr. No.Name of the Person/ Entity1. Mr. Motilal Oswal2. Mr. Raamdeo Agrawal3. Mrs. Vimla Oswal4. Mrs. Suneeta Agrawal5. Passionate Investment Management Pvt. Ltd.6. OSAG Enterprises LLP7. VISU AssociatesNote: Shareholding of HUFs, are held in the names of the respective individuals in the capacity of Karta. Hence, HUFs are notseparately listed hereinabove.Unclaimed Equity Shares in the Suspense AccountAs per Clause 5A(I) of the Listing Agreement, the Company reports the following details in respect of equity shares lying in thesuspense account .Number of ShareholdersNumber of Equity sharesAggregate Number of shareholders and the outstanding sharesin the suspense account lying as on 1st April, 2010Number of shareholders who approached the Company fortransfer of shares from suspense account during the yearNumber of Shareholders to whom shares were transferred fromthe suspense account during the yearAggregate Number of Shareholders and the outstanding sharesin the suspense account lying as on 31st March, 20117 6551 401 406 61552FINANCIAL STATEMENT 2010 - 2011

AUDITORS’ REPORTToThe Members of MOTILAL OSWAL FINANCIAL SERVICES LIMITED1. We have audited the attached Balance Sheet of MOTILAL OSWAL FINANCIAL SERVICES LIMITED (‘the Company’) asat March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that dateannexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.3. As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report)(Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of‘The Companies Act, 1956’ of India (the ‘Act’) and on the basis of such checks of the books and records of the Companyas we considered appropriate and according to the information and explanations given to us, we give in the Annexure astatement on the matters specified in paragraphs 4 and 5 of the said Order.4. Further to our comments in the paragraph 3 above, we report that:i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessaryfor the purposes of our audit;ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears fromour examination of those books;iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement withthe books of account;iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report complywith the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.v. On the basis of the written representations received from the directors, as on March 31, 2011, and taken on recordby the Board of Directors, we report that none of the directors is disqualified as on March 31, 2011 from beingappointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.vi. In our opinion and to the best of our information and according to the explanations given to us, the said accountsgive the information required by the Companies Act, 1956, in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India;a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2011;b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; andc) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.Place: MumbaiDate: April 30, 2011For Haribhakti & Co.Chartered AccountantsFirm’s Registration No. 103523WRakesh RathiPartnerMembership No. 45228MOTILAL OSWAL FINANCIAL SERVICES LIMITED 53

ANNEXURE TO AUDITORS’ REPORTReferred to in paragraph 3 of the Auditors’ Report of even date to the members of MOTILAL OSWALFINANCIAL SERVICES LIMITED on the financial statements for the year ended March 31, 2011(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation offixed assets.(b) The fixed assets of the Company have been physically verified by the management during the year and no materialdiscrepancies between the book records and the physical assets have been noticed. In our opinion, the frequency ofverification is reasonable.(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets hasnot been disposed of by the Company during the year.(ii) (a) As informed to us, the inventories (shares) which are held in dematerialized form, have been verified by themanagement. In our opinion, the frequency of verification is reasonable.(b) The procedures of verification of inventories (shares) followed by the management are reasonable and adequate inrelation to the size of the Company and the nature of its business.(c) The Company is maintaining proper records of inventory (shares). We are informed that no material discrepancieswere noticed on physical verification between the dematerialised stocks and the book records.(iii) (a) The Company has granted unsecured loan to seven subsidiary companies covered in the register maintained underSection 301 of the Companies Act, 1956. The maximum amount involved during the year was R 866,189.58 (inthousands) and the year-end balance of loans granted to such parties was R Nil.(b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms andconditions for such loans are not, prima facie, prejudicial to the interest of the Company.(c) The loans are repayable on demand and whenever the loans are called for the Company has received the principalamount and interest accordingly.(d) Since there is no stipulation as regards repayment schedule, clause 4(iii)(d) is not applicable.(e) As informed, the Company has not taken any loans, secured or unsecured from companies, firms or other partiescovered in the register maintained under Section 301 of the Companies Act, 1956. Consequently sub-clause (f) and(g) of clause 4(iii) are not applicable.(iv) In our opinion and according to the information and explanations given to us, there exists an adequate internal controlsystem commensurate with the size of the Company and the nature of its business with regard to purchase of inventory(shares) and fixed assets and for the sale of service. During the course of our audit, we have not observed any continuingfailure to correct major weakness in internal control system of the Company.(v) (a) According to the information and explanations given to us, we are of the opinion that the particulars of contractsor arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the registermaintained under Section 301 have been so entered.(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuanceof such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financialyear at prices which are reasonable having regard to the prevailing market prices at the relevant time.(vi) The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Actand the rules framed thereunder.(vii) In our opinion, the Company has an adequate internal audit system commensurate with the its size and nature of itsbusiness.(viii) Since the Company is engaged in service sector, clause 4(viii) in respect of maintenance of Cost records is not applicableto Company.(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund,investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax, customsduty, cess and other material statutory dues applicable to it. As explained to us, the provisions regarding sales-taxand excise duty are presently not applicable to the Company.Further, since the Central Government has till date not prescribed the amount of cess payable under section 441A ofthe Companies Act, 1956, we are not in a position to comment upon the regularity or otherwise of the Company indepositing the same.54FINANCIAL STATEMENT 2010 - 2011

ANNEXURE TO AUDITORS’ REPORT(b) According to the information and explanations given to us, no undisputed amounts payable in respect of providentfund, investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax,customs duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more thansix months from the date they became payable.(c) According to the records of the Company, the dues outstanding of income-tax, wealth-tax, service tax, customs duty,and cess on account of any dispute, are as follows:Name of the statute Nature of dues Amount(R in thousands)Period to which theamount relatesForum wheredispute is pendingIncome Tax Act, 1961 Income Tax R 656.17 A.Y. 2007-08 CIT (Appeal)(x) There are no accumulated losses as at March 31, 2011. Further, the Company has not incurred cash losses during thefinancial year covered by our audit and the immediately preceding financial year.(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repaymentof dues to a financial institution, bank or debenture holders.(xii) We are of the opinion that the Company has maintained adequate records where the Company has granted loans andadvances on the basis of security by way of pledge of shares, debentures and other securities.(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.(xiv) According to the information and explanation given to us, we are of the opinion that the Company has maintained properrecords in respect of trading transactions and contracts of shares, securities, debentures and other investments andtimely entries have been made therein. Further, the investments have been held by the Company, in its own name.(xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guaranteegiven by the Company, for one of its subsidiaries for obtaining loan from banks or financial institutions during the year, isnot prejudicial to the interest of the Company.(xvi) The Company has not obtained any term loans.(xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet of theCompany, we report that funds amounting to R 155,443.26 (in thousands) raised on short-term basis have been usedfor long-term investment. The Company’s short term liabilities and provisions are increased to the extent of the statedamount. In the absence of relevant details, we are unable to comment upon their utilisation.(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the registermaintained under Section 301 of the Act.(xix) According to the information and explanations given to us, during the year the Company had issued and redeemdunsecured non convertible debentures.(xx) During the year, the Company has not raised any money by way of public issue.(xxi) During the course of our examination of the books and records of the Company, carried out in accordance with thegenerally accepted auditing practices in India, and according to the information and explanations given to us, we haveneither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we beeninformed of such case by the management.Place: MumbaiDate: April 30, 2011For Haribhakti & Co.Chartered AccountantsFirm’s Registration No. 103523WRakesh RathiPartnerMembership No. 45228MOTILAL OSWAL FINANCIAL SERVICES LIMITED 55

BALANCE SHEETBalance Sheet as at 31st March, 2011ScheduleNo.As at31-Mar-2011(R in ‘000)As at31-Mar-2010(R in ‘000)I SOURCES OF FUNDSShare Holder’s Fund :Share Capital A 144,419.23 143,172.22ESOP Outstanding B 747.95 532.23Reserves and Surplus C 4,980,585.30 4,591,149.21Loan Funds :Unsecured Loans D - 593,209.20Deferred Tax Liability 23,039.11 11,535.01TOTAL SOURCES OF FUND 5,148,791.59 5,339,597.87II APPLICATION OF FUNDSFixed Assets (At Cost) :Gross Block 168,227.86 158,411.89Less:- Depreciation 127.00 52.21Net Block E 168,100.86 158,359.67Capital Work-in-Progress (Including Capital Advances) 1,204,859.02 874,789.931,372,959.88 1,033,149.60Investments F 832,626.07 582,359.42Current Assets, Loans and Advances :Stock in Trade G 2,883.03 1,077,642.51Cash and bank balances H 16,079.49 250,608.03Loans & Advances I 3,677,026.25 2,971,074.39Other Assets J 210.29 40.69(i) 3,696,199.06 4,299,365.62Current Liabilities and Provisions :Current Liabilities K 86,922.48 25,632.37Provisions L 666,070.95 549,644.39(ii) 752,993.43 575,276.77Net Current Assets (i)-(ii) 2,943,205.64 3,724,088.85TOTAL APPLICATIONS OF FUND 5,148,791.59 5,339,597.87Significant Accounting Policies & Notes to AccountsSSchedules referred to above form an integral part of the financial statementsAs Per Our Attached Report of Even DateFor Haribhakti & Co.Chartered AccountantsFor and on behalf of the Board ofMOTILAL OSWAL FINANCIAL SERVICES LTD.Rakesh Rathi Samrat Sanyal Motilal Oswal Raamdeo AgrawalPartner Company Secretary Chairman & Managing Director Joint Managing DirectorM.No. 045228Place : MumbaiDated : 30th April, 201156FINANCIAL STATEMENT 2010 - 2011

PROFIT & LOSS ACCOUNTProfit & Loss Account for the year ended 31st March, 2011ScheduleNo.For the Yearended 31-Mar-11(R in ‘000)For the Yearended 31-Mar-10(R in ‘000)INCOMEIncome from operations M 495,284.69 510,935.25Other Income N 147,172.18 131,650.59TOTAL 642,456.87 642,585.84EXPENDITUREOperating Expenses O 7,582.66 777.38Personnel Expenses P 26,777.20 15,274.91Administrative & Other Expenses Q 31,019.35 24,954.40TOTAL 65,379.21 41,006.70Profit before Depreciation, Interest & Taxation 577,077.65 601,579.14Depreciation 74.79 19.69Profit before Interest & Taxation 577,002.86 601,559.45Interest and Finance Charges R 11,554.12 28,459.09PROFIT BEFORE TAX 565,448.74 573,100.37Provision for TaxCurrent Tax 126,651.95 137,435.03Wealth Tax 66.06 –Deffered Tax 11,504.09 11,709.27for Previous year(s) (Income Tax) 630.10 _138,852.20 149,144.30PROFIT AFTER TAX 426,596.54 423,956.07Balance brought forward from Previous year 351,303.97 224,131.09PROFIT AVAILABLE FOR APPROPRIATIONS 777,900.51 648,087.16APPROPRIATIONSTransfer to Statutory Reserve for the year (85,319.31) (84,791.21)Proposed Dividend (202,261.80) (171,806.66)Provision for Proposed Dividend Distribution Tax (32,812.21) (6,268.83)Transfer to General Reserve (42,659.65) (33,916.49)Balance Carried to Balance Sheet 414,847.54 351,303.97Earnings per share (R)Basic Earnings per share (Face Value of share R 1 each) 2.96 2.97Diluted Earnings per share (Face Value of share R 1 each) 2.96 2.97Significant Accounting Policies & Notes to AccountsSSchedules referred to above form an integral part of the financial statementsAs Per Our Attached Report of Even DateFor Haribhakti & Co.For and on behalf of the Board ofChartered AccountantsMOTILAL OSWAL FINANCIAL SERVICES LTD.Rakesh Rathi Samrat Sanyal Motilal Oswal Raamdeo AgrawalPartner Company Secretary Chairman & Managing Director Joint Managing DirectorM.No. 045228Place : MumbaiDated : 30th April, 2011MOTILAL OSWAL FINANCIAL SERVICES LIMITED 57

CASH FLOWCash Flow Statement for the year ended 31st March, 2011ParticularsFor the Year Ended31-Mar-2011(R in ‘000)For the Year Ended31-Mar-2010(R in ‘000)CASH FLOW FROM OPERATING ACTIVITIESProfit Before Tax 565,448.74 573,100.37Add :1) Employee Stock Option Compensation Cost 227.16 279.522) Depreciation 74.79 301.95 19.69 299.21565,750.69 573,399.57Less :Dividend Received 144,609.93 (144,609.93) 126,759.68 (126,759.68)Operating Profit 421,140.76 446,639.90Adjustment for working capital changes1) (Increase) / Decrease in Stock-in-trade 1,074,759.48 (750,428.82)2) (Increase) / Decrease in Loans & Advances (664,086.08) (763,914.55)3) Increase / (Decrease) in Provision 3,762.47 186.034) (Increase) / Decrease in Other Current Assets (169.60) 38.185) Increase / (Decrease) in Current Liabilities 61,290.10 475,556.37 15,822.50 (1,498,296.67)Cash Generated / (used) from Operations 896,697.14 (1,051,656.77)Taxes Paid (113,461.01) (164,146.85)Net Cash generated / (used) in Operating Activities 783,236.13 (1,215,803.62)CASH FLOW FROM INVESTING ACTIVITIES(Increase)/Decrease In Investments (84,945.78) (268,847.77)(Increase)/Decrease in Fixed Assets (including capital WIP) (339,885.07) (1,033,120.06)Dividend Received 144,609.93 126,759.68Net Cash Flow from Investing Activities (280,220.92) (1,175,208.15)CASH FLOW FROM FINANCING ACTIVITIESIssue of Share capital 262.55 1,152.22Received of Securities Premium 33,565.71 153,642.76Proceeds / (Repayment) of Borrowing (593,209.20) 593,209.20Dividend paid (including Dividend distribution Tax) (178,162.81) (118,712.97)Net Cash Flow from Financing Activities (737,543.75) 629,291.21Net Cash Flow for the Year Ended (234,528.54) (1,761,720.57)Cash & Cash Equivalents as at beginning of period :Cash in hand - 1.84Scheduled Bank - In Current Account 245,476.95 2,001,056.40Fixed Deposit with Banks (lien with stock exchange) 5,000.00 11,152.00Scheduled Bank - Unpaid Dividend Account 131.09 118.37Total Cash & Cash Equivalents as at beginning of period 250,608.03 2,012,328.60Cash & Cash Equivalents as at end of period :Scheduled Bank - In Current Account 5,816.88 245,476.95Fixed Deposit with Banks (lien with stock exchange) 10,000.00 5,000.00Scheduled Bank - Unpaid Dividend Account 262.61 131.09Total Cash & Cash Equivalents as at end of period 16,079.49 250,608.03As Per Our Attached Report of Even DateFor Haribhakti & Co.For and on behalf of the Board ofChartered AccountantsMOTILAL OSWAL FINANCIAL SERVICES LTD.Rakesh Rathi Samrat Sanyal Motilal Oswal Raamdeo AgrawalPartner Company Secretary Chairman & Managing Director Joint Managing DirectorM.No. 045228Place : MumbaiDated : 30th April, 201158FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011Schedule A : Share CapitalAs at31-Mar-2011(R in ‘000)As at31-Mar-2010(R in ‘000)Authorised870,000,000 Equity Shares of R 1 each 870,000.00 870,000.0050,00,000 Preference Shares of R 100 each 500,000.00 500,000.00TOTAL 1,370,000.00 1,370,000.00Issued, Subscribed & Paid-Up144,419,229 Equity Shares of R 1/- each fully paid up(Previous Year 143,172,216 Equity Shares of R 1/- eachfully paid-up)144,419.23 143,172.22[Includes allotment of 19,73,529 Equity Shares forconsideration other than cash (Previous Year - 989,066Equity Shares)]TOTAL 144,419.23 143,172.22Schedule B : ESOP OutstandingOpening 532.23 252.71Add: Deferred Employee Compensation 215.72 747.95 279.52 532.23TOTAL 747.95 532.23Schedule C : Reserves & SurplusStatutory Reserve (under Sec. 45IC of RBI Act, 1934)Opening balance 211,897.04 127,105.82Add : Transfer from Profit & Loss A/c for the year 85,319.31 297,216.35 84,791.21 211,897.04Securities Premium AccountOpening balance 3,943,949.03 3,790,306.27Addition during the period 197,902.12 4,141,851.14 153,642.76 3,943,949.03Capital Redemption Reserve 1.03 1.03Profit & Loss Account 414,847.54 351,303.97General ReserveOpening balance 83,998.15 50,081.67Addition during the year 42,671.10 126,669.25 33,916.49 83,998.15TOTAL 4,980,585.30 4,591,149.21Schedule D : Unsecured LoansCommercial Paper 600,000.00Less: Discount not written off – – (6,790.80) 593,209.20Maximum outstanding during the year R 3,250,000/-(Previous Year R 1,000,000/-)TOTAL – 593,209.20MOTILAL OSWAL FINANCIAL SERVICES LIMITED 59

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011Schedule E : Fixed Assets(R in ‘000)No. Particulars As on01-Apr-10GROSS BLOCK DEPRECIATION NET BLOCKAdditionAs on31-Mar-11As on01-Apr-10For thePeriod ended31-Mar-2011DeductionDeductionAs on31-Mar-11As on31-Mar-11As on31-Mar-101 Car – 9,606.16 – 9,606.15 – 6.81 – 6.81 9,599.34 –2 Land 158,330.14 – 158,330.14 – – – – 158,330.14 158,330.143 Computer 81.75 209.82 – 291.57 52.21 67.98 – 120.19 171.38 29.54TOTAL 158,411.89 9,815.98 – 168,227.86 52.21 74.79 – 127.00 168,100.86 158,359.67Previous Year 81.75 158,330.14 – 158,411.89 32.52 19.69 – 52.21 158,359.67 –CWIP 1,204,859.02 874,789.93Schedule F : InvestmentsFaceValueQuantity31-Mar-11As at31-Mar-11R in ‘000Quantity31-Mar-10As at31-Mar-10R in ‘000Long Term InvestmentsInvestment in Equity Shares (Fully Paid-Up)Unquoted Investments - Equity Shares insubsidiary companies (Non Trade)Motilal Oswal Securities Ltd. 10 1,318,218 13,182.18 1,318,218 13,182.18Motilal Oswal Commodities Brokers Pvt. Ltd. 10 400,000 4,000.00 400,000 4,000.00Motilal Oswal Investment Advisors Pvt. Ltd. 10 875,000 310,043.89 750,000 144,723.02Motilal Oswal Private Equity Advisors Pvt. Ltd. 10 50,000 500.00 50,000 500.00Motilal Oswal Insurance Brokers Pvt. Ltd. 10 990,000 9,900.00 990,000 9,900.00337,626.07 172,305.20Unquoted Investments - Preference Shares(Non Trade)Motilal Oswal Commodities Brokers Pvt. Ltd. 10 – – 600,000 6,000.00Other Investments (Non Trade)Investments In India Business Excellence Fund(450 units of R 900,000 each partly paid-up,Previous Year 450 units of R 750,000 each partlypaid-up, FV R 1,000,000)1,000,000 450 405,000.00 450 337,500.00Investments in India Reality Excellence Fund(300 units of R 300,000 each partly paid-up,Previous Year 300 units of R 125,000 each partlypaid-up, FV R 500,000)500,000 300 90,000.00 300 37,500.00Investment Property – 29,054.22Total 832,626.07 582,359.4260FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011Schedule G : Stock in TradeFaceValueQuantity31-Mar-1131-Mar-11R in ‘000Quantity31-Mar-1031-Mar-10R in ‘000Equity Shares(Valued at Cost or Market Value whichever is lower)Aban Offshore Ltd. 2 – – 8,800 10,564.72ABB Limited 2 – – 50,500 41,702.53ACC Limited 10 – – 11,280 10,822.80Aditya Birla Nuvo Limited 10 6 4.89 4,806 4,262.55Advanta India Limited 10 – – 296 181.31Agro Tech Foods Limited 10 1 0.37 – –AIA Engineering Limited 2 2 0.70 – –Alstom Projects India Limited 10 – – 550 341.81Ambika Cotton Mills Limited 10 – – 1 0.16Ambuja Cements Ltd. 2 – – 14 1.76Amtek Auto Ltd. 2 – – 4 0.78Andhra Bank 10 – – 6,900 664.86Asian Paints Limited 10 – – 200 410.85Aurobindo Pharma Ltd. 5 – – 4 3.80Axis Bank Limited 10 – – 8,550 10,096.69Bajaj Auto Limited 10 121 177.05 7,199 14,327.26Bajaj Finserv Limited 5 – – 1 0.34Bajaj Hindusthan Ltd. 1 1 0.07 21,375 3,045.30Bajaj Holdings & Investment Limited 10 – – 1 0.62Bank of Baroda 10 – – 2,799 1,787.40Bank of India 10 2 0.95 33,250 10,951.23BEML Limited 10 – – 3,375 3,562.07Benchmark Mutual Fund 10 – – 72,500 38,057.18BGR Energy Systems Limited 10 – – 1,600 853.41Bharat Electronics Ltd. 10 – – 7,728 16,865.47Bharat Forge Ltd. 2 – – 3 0.80Bharat Heavy Electricals Ltd. 10 – – 6,000 14,443.77Bharti Airtel Limited 5 – – 502 157.93Bhushan Steel Limited 10 – – 22,090 37,198.40Binani Industries Limited 10 – – 1 0.10Biocon Limited 5 – – 13,873 4,013.31Blue Star Limited 2 – – 6 2.14Bombay Rayon Fashions Limited 10 – – 4 0.91Borax Morarji 10 3,211 140.00 – –C & C Constructions Limited 10 87 11.01 – –Canara Bank 10 – – 16,794 6,905.89Career Point Infosystems Limited 10 – 25.03 – –Century Textiles & Industries Ltd. 10 – – 28,831 14,862.73CESC Ltd. 10 – – 6 2.31Colgate Palmolive (India) Ltd. 1 – – 2,202 1,549.79Core Projects and Technologies Limited 2 – – 7 1.68Corporation Bank 10 – – 5 2.43Cummins India Ltd. 2 – – 3 1.54D B Realty Limited 10 4,091 484.37 – –Deccan Chronicle Holdings Ltd. 2 – – 7 1.09MOTILAL OSWAL FINANCIAL SERVICES LIMITED 61

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011Schedule G : Stock in Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in ‘000Quantity31-Mar-1031-Mar-10R in ‘000DLF Limited 2 – – 20,802 6,496.96Dolphin Offshore Enterprises (India) Limited 10 5 0.70 – –Dredging Corporation of India Limited 10 1 0.35 2 1.22Dwarikesh Sugar Industries Limited 10 2 0.15 – –Easun Reyrolle Ltd. 2 – – 600 56.54Educomp Solutions Limited 2 20 8.39 20 15.22Electrotherm (India) Limited 10 2 0.41 – –Ess Dee Aluminium Limited 10 7 2.94 – –Essar Oil Limited 10 – – 36,109 5,018.76ETC Networks Limited 10 – – 129,624 28,433.30Everest Kanto Cylinder Limited 2 – – 12,000 1,467.83Everonn Education Limited 10 – – 500 185.34Exide Industries Limited 1 1 0.14 – –Financial Technologies (India) Limited 2 – – 9,449 15,223.55GAIL (India) Limited 10 24 11.14 15,965 6,571.75Ganesh Housing Corporation Limited 10 1 0.15 – –GlaxoSmithKline Consumer Healthcare Limited 10 – – 1 1.54Glenmark Pharmaceuticals Ltd. 1 – – 2 0.54GMR Infrastructure Limited 1 – – 35,000 2,197.58Grasim Industries Ltd. 10 – – 17,074 49,141.38Great Offshore Limited 10 – – 14,379 5,989.28Greycells Education Ltd. 10 – – 14,666 796.13GSS America Infotech Limited 10 – – 118 35.31Gujarat Gas Co. Ltd. 2 8 3.07 783 223.31Gujarat Sidhee Cements Ltd. 10 1 0.01 1 0.02Gujarat State Fertilizers & Chemicals Ltd. 10 – – 1 0.22GVK Power & Infrastructure Limited 1 – – 150 6.53HDFC Bank Ltd. 10 – – 8,600 16,581.64HEG Ltd. 10 – – 696 236.40Hero Honda Motors Ltd. 2 – – 4,620 9,087.61Himadri Chemicals and Industries Limited 1 2 0.09 – –Hinduja Ventures Limited 10 – – 33 10.42Hindustan Construction Co. Ltd. 1 1 0.04 12,601 1,658.84Hindustan Petroleum Corporation Ltd. 10 – – 14,299 4,569.36Hindustan Zinc Ltd. 10 – – 8,676 10,502.34Hitachi Home and Life Solutions (India) Limited 10 1 0.22 – –Housing Development and Infrastructure Limited 10 – – 51,858 16,597.18Housing Development Finance Corporation Ltd. 10 – – 8,850 23,390.63Hyderabad Industries Limited 10 2 0.70 – –ICICI Bank Ltd. 10 – – 21,449 20,369.39ICSA (India) Limited 2 – – 1,200 154.65IDBI Bank Limited 10 – – 16,800 2,025.25India Infoline Limited 2 – – 2,500 287.46Indiabulls Real Estate Limited 2 – – 1,300 198.83Indian Oil Corporation Ltd. 10 – – 1,195 357.18Indian Overseas Bank 10 – – 3 0.29Indo Tech Transformers Limited 10 – – 12 3.4862FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011Schedule G : Stock in Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in ‘000Quantity31-Mar-1031-Mar-10R in ‘000Indraprastha Gas Limited 10 1 0.30 – –IndusInd Bank Limited 10 1 0.26 1 0.17Infosys Technologies Ltd. 5 – – 6,010 16,271.30Infrastructure Development Finance Company Limited 10 – – 2,950 478.43IOL Netcom Limited 10 5 0.03 23,023 454.63IVRCL Infrastructures & Projects Ltd. 2 2 0.16 2 0.33Jain Irrigation Systems Limited 10 – – 2,250 2,153.33Jaipan Industries Ltd. 10 – – 13,433 345.24Jaiprakash Associates Limited 2 – – 33,760 4,424.54Jayshree Tea & Industries Limited 5 1 0.16 – –Jet Airways (India) Ltd. 10 5 2.24 5 2.41Jindal Steel & Power Ltd. 1 – – 22,080 14,895.11JSW Steel Limited 10 – – 36,666 44,788.41Jubilant Foodworks Limited 10 1 0.54 156 48.67Jupiter Bioscience Limited 10 100 1.98 369 30.59K Sera Sera Productions Ltd. 10 299 3.98 368,250 4,464.11Kalyani Steels Limited 10 2 0.56 – –Khaitan Electricals Limited 10 3 0.34 – –Kingfisher Airlines Limited 10 – – 12,764 607.39Kiri Dyes and Chemicals Limited 10 – – 471 332.12Kirloskar Brothers Limited 2 3 0.40 – –Kotak Mahindra Bank Limited 10 – – 16,479 12,392.66Kotak Mahindra Mutual Fund–Kotak Nifty ETF 10 – – 13,000 6,426.80Koutons Retail India Limited 10 – – 1 0.35KPIT Cummins Infosystems Limited 2 – – 306 35.64Larsen & Toubro Limited 2 – – 14,000 22,375.11Lupin Limited 10 – – 7,706 12,467.37Magma Fincorp Limited 10 – – 1 0.28Mahindra & Mahindra Ltd. 5 – – 13,728 7,396.64Mahindra Holidays & Resorts India Limited 10 – – 14 7.74Man Infraconstruction Limited 10 1 0.14 505 183.53Maruti Suzuki India Limited 5 – – 18,200 26,464.01Mastek Ltd. 5 – – 1,908 638.94Moser–Baer (I) Ltd. 10 – – 2,477 187.87MphasiS Limited 10 – – 799 495.29Mundra Port and Special Economic Zone Limited 10 – – 18,001 13,992.95Nalwa Sons Investments Limited 10 2 1.53 – –Neyveli Lignite Corporation Limited 10 2 0.21 – –NIIT Limited 2 1 0.06 – –Nitin Fire Protection Industries Limited 10 – – 1 0.34Northgate Technologies Limited 10 – – 13,664 261.97NTPC Limited 10 – – 84,500 17,078.02Oil & Natural Gas Corpn. Ltd. 10 – – 10,350 11,302.83OnMobile Global Limited 10 – – 1,627 634.91Opto Circuits (India) Limited 10 – – 8,160 1,784.35Oracle Financial Services Software Limited 5 – – 2 4.61Orchid Chemicals & Pharmaceuticals Limited 10 1 0.30 – –MOTILAL OSWAL FINANCIAL SERVICES LIMITED 63

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011Schedule G : Stock in Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in ‘000Quantity31-Mar-1031-Mar-10R in ‘000Oriental Bank of Commerce 10 – – 26,400 7,839.90Pantaloon Retail (India) Ltd. 2 – – 3 1.16Parekh Aluminex Limited 10 1 0.28 – –Parsvnath Developers Limited 10 – – 374 42.01Patel Engineering Limited 1 4 0.56 1,002 457.97Patni Computer Systems Limited 2 – – 18,199 9,852.84Pipavav Shipyard Limited 10 – – 1 0.07Polyplex Corporation Limited 10 5 1.03 – –Power Finance Corporation Limited 10 – – 1 0.26Praj Industries Ltd. 2 – – 250 21.73Pricol Limited 1 – – 3 0.07Punj Lloyd Limited 2 – – 1,500 269.19Punjab National Bank 10 – – 21,000 19,712.38Rain Commodities Limited 10 1 0.15 – –Rallis India Limited 10 6 7.87 – –Ranbaxy Laboratories Ltd. 5 – – 16,000 7,496.48Rei Agro Limited 1 14 0.38 – –Reliance Capital Limited 10 – – 25,162 19,677.86Reliance Communications Limited 5 – – 24,500 4,067.18Reliance Industries Ltd. 10 – – 21,000 22,917.86Reliance Infrastructure Limited 10 – – 28,980 29,227.32Reliance Media World Limited 5 – – 4,500 407.60Reliance Media Works Limited 5 – – 1,800 394.73Reliance Mutual Fund–Banking Exchange Traded 10 – – 900 811.77Fund (ETF)Reliance Power Limited 10 – – 27 4.08Religare Enterprises Limited 10 – – 3 1.12Renaissance Jewellery Limited 10 – – 313 24.85Ruchi Soya Industries Limited 2 25 2.64 – –Rural Electrification Corporation Limited 10 – – 71,997 15,949.23Selan Exploration Technology Limited 10 – – 800 342.75Sesa Goa Ltd. 1 – – 7 3.26Shekhawati Poly–Yarn Limited 10 5 0.16 – –Shipping Corporation of India Limited 10 1 0.11 – –Shiv–Vani Oil & Gas Exploration Services Limited 10 1 0.29 876 381.37Shree Ashtavinayak Cine Vision Limited 1 – – 115 1.38Shree Renuka Sugars Limited 1 – – 60,000 4,472.50Shri Lakshmi Cotsyn Limited 10 – – 1 0.18Siemens Ltd. 2 – – 10,534 7,318.81Simplex Infrastructures Limited 2 6 1.97 – –Spice Mobiles Limited 3 1 0.06 1 0.06SPICELEC 10 1 0.01 – –State Bank of India 10 5 13.83 30,235 61,177.53Sterling Biotech Limited 1 – – 10,000 1,056.15Sterlite Industries (India) Limited 2 – – 19,710 15,885.34Sterlite Technologies Limited 2 – – 1 0.09Subex Limited 10 26,000 1,400.10 6,004 369.9764FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011Schedule G : Stock in Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in ‘000Quantity31-Mar-1031-Mar-10R in ‘000Sun Pharmaceuticals Industries Ltd. 5 – – 2,700 4,568.98Sun TV Network Limited 5 1,112 499.57 – –Sunteck Realty Limited 2 – – 6 3.43Supreme Industries Ltd. 10 – – 1 0.47Swaraj Mazda Ltd. 10 – – 313 77.03Tata Communications Limited 10 – – 6,825 1,916.87Tata Consultancy Services Limited 1 – – 12,000 9,746.35Tata Elxsi Limited 10 – – 201 65.00Tata Investment Corporation Ltd. 10 – – 197 97.96Tata Motors Limited 10 – – 9,471 4,304.60Tata Power Co. Ltd. 10 – – 15,008 20,623.79Tata Sponge Iron Limited 10 12 4.11 – –Tata Teleservices (Maharashtra) Limited 10 – – 104,500 2,528.11Tata Global Bev 1 1 0.12 – –Tech Mahindra Limited 10 – – 22,232 19,591.09Television Eighteen India Ltd. 5 – – 56,600 4,507.30Texmo Pipes and Products Limited 10 – – 125 11.57The Andhra Pradesh Paper Mills Limited 10 3 0.85 – –The Federal Bank Ltd. 10 50 20.93 5,107 1,350.16The Great Eastern Shipping Co. Limited 10 – – 39,601 11,455.55The Phoenix Mills Limited 2 2 0.37 2 0.46Thermax Ltd. 2 – – 1 0.68Tilaknagar Industries Ltd. 10 – – 2,009 259.76TIPS Industries Limited 10 – – 1 0.05Titagarh Wagons Limited 10 2 0.66 – –TTK Healthcare Limited 10 1 0.40 – –Tulip Telecom Limited 10 – – 12,500 10,541.77UltraTech Cement Limited 10 – – 1 1.15Unitech Ltd. 2 – – 116,999 8,759.63United Phosphorus Limited 2 – – 10,349 1,549.58United Spirits Limited 10 – – 23,750 32,850.67Valecha Engineering Limited 10 – – 836 141.23Varun Industries Limited 10 1 0.18 – –Videocon Industries Limited 10 1 0.19 11,099 2,570.11Voltas Ltd. 1 – – 5,380 964.10West Coast Paper Mills Limited 2 13 1.11 – –Whirlpool of India Limited 10 – – 1,000 163.91Wipro Ltd. 2 – – 6,600 4,421.52Yes Bank Limited 10 124 38.39 4,400 1,122.67Zee Entertainment Enterprises Ltd. 1 – – 15,402 4,160.25Zydus Wellness Limited 10 1 0.57 – –Zylog Systems Limited 10 – – 300 127.69TOTAL 2,883.03 1,077,642.51Aggregate value of Stock in TradeAt Book Value 3,363.91 1,077,642.51At Market Value 2,883.03 1,082,619.48MOTILAL OSWAL FINANCIAL SERVICES LIMITED 65

SCHEDULESSchedules to Balance Sheet as at 31st March, 2011As at31-Mar-2011(R in ‘000)As at31-Mar-2010(R in ‘000)Schedule H : Cash & Bank BalanceBalance With Banks:Scheduled Bank - In Current Account 5,816.88 245,476.95Fixed Deposit with Banks 10,000.00 5,000.00Scheduled Bank - Unpaid Dividend Account 262.61 131.09TOTAL 16,079.49 250,608.03Schedule I : Loans and AdvancesLoans, Advances & Deposits Recoverable in Cash or In Kind62,324.30 13,623.52or for Value to be received Standard AssetsLoans to Subsidiary – 43,443.86Loans to OthersUnsecured (includes interest accrued on loans) 299,335.55 103,168.92Secured (includes interest accrued on loans) 2,657,507.77 2,956,843.32 1,507,473.11 1,610,642.04Sub–Standard AssetsNon Performing Assets (Debts outstanding for a period– 13,919.89exceeding Six months)Other AdvancesLoan to staff 153.88 12.51Deposit for arbitrage 235,340.41 660,135.27Mark to Market Margin - Equity Idex/Stock Futures 8.16Equity Index/Stock Option Premium 30,569.06 280,636.88Less : Provision for loss (227.10) 30,350.12 (1,253.32) 279,383.56Deposits 516.60 281.90Advance Tax & Tax Deducted at Source 391,497.63 349,631.85TOTAL 3,677,026.25 2,971,074.39Schedule J : Other AssetsAccrued Interest on Fixed Deposit Receipt 210.29 40.69TOTAL 210.29 40.69Schedule K : Current LiabilitiesSundry LiabilitiesDue to MSME – –Due to Others 15,808.79 11,846.77Unpaid Dividend 262.56 131.04Book overdraft from Banks 70,851.12Mark to Market Margin - Equity Idex/Stock Futures – (6,978.81) –Less : Provision for loss – 20,633.37 13,654.56TOTAL 86,922.48 25,632.37Schedule L : ProvisionsProvision for Gratuity 1,101.83 555.50Provisions against Standard Assets / Sub-Standard Assets 7,392.11 4,175.97Provision for Fringe Benefit Tax 355.28 950.97Provision for Income Tax (Incl. Wealth Tax) 422,235.04 365,886.47Proposed Dividend 202,186.92 171,806.66Provision for Proposed Dividend Distribution Tax 32,799.77 6,268.83TOTAL 666,070.95 549,644.3966FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to the Profit and Loss Account for the period ended 31st March, 2011Schedule M : Income from OperationsFor the YearEnded 31-Mar-11(R in ‘000)For the YearEnded 31-Mar-10(R in ‘000)Interest 396,637.91 255,924.58Profit / (Loss) from Arbitrage Transaction 88,499.95 245,430.43Other Operating Income (Dividend From Arbitrage) 10,146.83 9,580.25TOTAL 495,284.69 510,935.25Schedule N : Other IncomeDividend on Long term Investments (Non-trade) – 724.84Processing Charges 2,500.00 –Dividend on Mutual Fund 10,547.43 33,554.43Profit/(Loss) on sale of Investments (Non-trade) (1,554.22) 12,423.28Dividend from Subsidiary 134,062.50 83,625.00Interest on Fixed Deposits 672.87 413.85Miscellaneous Income 943.60 909.20TOTAL 147,172.18 131,650.59Schedule O : Operating ExpensesFees & Other Operating Expenses 7,582.66 777.38TOTAL 7,582.66 777.38Schedule P : Personnel ExpensesSalary, Bonus and Allowances 14,090.00 12,958.25Directors Remuneration 11,300.00 1,200.00Directors sitting fees 420.00 460.00Contribution to provident and other funds 322.10 195.31Staff welfare expenses 98.76 275.33Gratuity 546.33 186.03TOTAL 26,777.20 15,274.91MOTILAL OSWAL FINANCIAL SERVICES LIMITED 67

SCHEDULESSchedules to the Profit and Loss Account for the period ended 31st March, 2011Schedule Q : Administrative & Other ExpensesFor the YearEnded 31-Mar-11(R in ‘000)For the YearEnded 31-Mar-10(R in ‘000)Rent, rates and taxes 236.61 7.00Insurance 357.70 339.54Legal & Professional Fees 4,994.26 4,926.65Remuneration to auditors 603.55 541.59Membership and subscription 248.52 172.23Marketing and Brand Promotion 12,872.99 12,705.11Printing & Stationery 1,736.00 1,390.50Communication Expenses 526.14 326.42Travelling Expenses 1,425.53 1,093.91Conveyance Expenses 29.19 35.71Courier Expenses 63.25 81.39Office Expenses – –Entertainment Expenses 394.42 391.53Miscellaneous Expenses 633.50 1,634.25Bad Debts Written Off [Net of Provision for doubtful debts utilised of(1,896.92) 6.14R 4,175.97 (in thousands) (Previous Year R Nil)]Provision on Standard Loan Assets 7,392.11 –Listing and credit rating fees 1,100.00 1,296.26Repair & Maintenance Others 202.50 6.18Donation 100.00 –TOTAL 31,019.35 24,954.40Schedule R : Interest & Finance ChargesBank Guarantee Commission and Other Charges 136.21 160.69Interest on Non Convertible Debentures – 9,791.33Discount on Commercial Paper 11,417.91 18,507.07TOTAL 11,554.12 28,459.0968FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011I Significant Accounting Policies:1.1 Basis of Preparation of Financial Statements:The accompanying financial statements are consistently prepared under the historical cost convention, on the accrual basis ofaccounting and comply with the accounting standards issued by the Institute of Chartered Accountants of India (to the extentapplicable) and in accordance with the generally accepted accounting principles, the provisions of the Companies Act, 1956and regulations of Reserve Bank of India to the extent applicable.1.2 Use of Estimates:The preparation of the financial statements in conformity with the generally accepted accounting principles requires themanagement to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expensesand disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financialstatements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financialstatements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financialstatements. Any differences of actual results to such estimates are recognized in the period in which the results are known /materialized.1.3 Fixed Assets & Depreciation:Fixed Assets are stated at cost less accumulated depreciation thereon. The cost of fixed assets comprises purchase priceand any attributable cost of bringing the asset to its working condition for its intended use. The Company provides pro-ratadepreciation from the date on which asset is acquired / put to use. In respect of assets sold, prorata depreciation is providedupto the date on which the asset is sold. On all assets, except as mentioned below, depreciation has been provided using theWritten Down Value method at the rates specified in Schedule XIV to the Companies Act, 1956.a) Assets costing R 5,000/- or less are fully depreciated in the year of purchase.b) Improvements to leased Assets are depreciated over the initial period of lease. Expenditure which are attributable toConstruction of a project are included as part of the cost of the construction project during construction period and includedunder capital work-in-progress which is allocated to the respective fixed assets on the completion of the constructionperiod.1.4 Borrowing Cost:Interest and other costs in connection with the borrowing of the funds to the extent related / attributed to the acquisition/construction of qualifying fixed assets are capitalised up to the date when such assets are ready for its intended use and otherborrowing costs are charged to Profit & Loss Account.1.5 Investments:Investments are classified into long-term investments and current investments. Investments that are intended to be held forone year or more are classified as long-term investments and investments that are intended to be held for less than one yearare classified as current investments.Long term investments are valued at cost. Provision for diminution in value of long term investments is made if in the opinionof management such a decline is other than temporary.Current investments are valued at cost or market/fair value, whichever is lower.1.6 Revenue Recognition:a) Interest Income is recognized on the time proportionate basis starting from the date of disbursement of loan. In case ofNon Performing Assets, interest income is recognized on receipt basis, as per NBFC Prudential norms.b) Dividend income is recognized when the right to receive payment is established.c) Income from arbitrage and trading in securities and derivatives comprises profit/loss on sale of securities held as stock-intradeand profit/loss on equity derivative instruments.1. Profit/loss on sale of securities is determined based on the Weighted Average cost of the securities sold.2. Profit/loss on equity derivative transactions is accounted for as explained below :-a. Initial and additional margin paid over and above initial margin, for entering into contracts for Equity Index/Stock Futures and or equity Index/stock options which are released on final settlement/squaring-up of underlyingcontracts are disclosed under Current Assets, Loans and advances. “Mark-to-market margin- Equity Index/StockMOTILAL OSWAL FINANCIAL SERVICES LIMITED 69

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)Futures” representing the amounts paid in respect of mark to market margin is disclosed under Loans andAdvances and amount received is shown under current liabilities.b. “Equity Index/Stock Option Premium Account” represents premium paid or received for buying or selling theoptions, respectively.c. On final settlement or squaring up of contracts for equity index / stock futures, the realized profit or loss afteradjusting the unrealized loss already accounted, if any, is recognized in the Profit and Loss Account. On settlementor squaring up of equity index / stock options before expiry, the premium prevailing in “Equity Index/Stock OptionPremium Account” on that date is recognized in the Profit and Loss Account. When more than one contract inrespect of the relevant series of equity index / stock futures or equity index / stock options contract to which thesquared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price ofthe contract so squared-up is determined using the weighted average cost method for calculating the profit/losson squaring-up.As at the balance sheet date, the mark to market on all hedged transactions comprising of Securities and EquityDerivatives positions is determined on a Portfolio basis with net unrealized losses being recognized in the Profit andLoss Account. Unrealized gains (on portfolio basis) are not recognized in the Profit and Loss Account on grounds ofprudence as enunciated in Accounting Standard - 1, Disclosure of Accounting Policies.In respect of other transactions, the unrealized losses on equity derivatives determined on scrip-basis are recognizedin Profit and Loss Account and unrealized gains are ignored; and in case of securities (shares, etc) the net unrealizedlosses are recognized in Profit & Loss Account and net unrealized gains are ignored.3. In respect of other heads of income the Company accounts the same on accrual basis.1.7 Stock In Trade:This comprises of arbitrage/trading positions of the company.1. Shares are valued at cost or market value, whichever is lower. The comparison of Cost and Market value is done separatelyfor each category of Shares. Cost is considered on Weighted Average Basis.2. Units of Mutual Funds are valued at cost or market value whichever in lower. Net asset value of units declared by mutualfunds is considered as market value for non-exchange traded Mutual Funds.1.8 Foreign Currency Transactions:Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchangedifferences, if any arising out of transactions settled during the year are recognized in the Profit and Loss Account. Monetaryassets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rateon that date. The exchange differences, if any, are recognized in the Profit and Loss Account and related assets and liabilitiesare accordingly restated in the Balance Sheet.1.9 Employee Benefits:Provident Fund:Contribution payable to the recognized provident fund, which is a defined contribution scheme, is charged to the Profit and LossAccount in the period in which they occur.Gratuity:Gratuity is post employment benefit and is in the nature of Defined Benefit Plan. The Liability recognized in the Balance Sheetin respect of gratuity is the present value of defined benefit obligation at the balance sheet date together with the adjustmentsfor unrecognized actuarial gain or losses and the past service costs. The defined benefit obligation is calculated at or near thebalance sheet date by an independent actuary using the projected unit credit method.Compensated Absences:As per the policy of the company, an employee can carry forward maximum 50% of the leave annually. No leave is allowed to beencashed. An obligation arises as employees render service that increases their entitlement to future compensated absences.Provision is made for expected cost of accumulating compensated absences as a result of unused leave entitlement which hasaccumulated as at the balance sheet date.Ex-gratia (Bonus):The Company recognizes the costs of bonus payments when it has a present obligation to make such payments as a result ofpast events and the reliable estimate of the obligation can be made.70FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)1.10 Taxation:Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-taxlaw), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxableincome for the period) and fringe benefit tax.Current Tax:Provision for current tax is made on the basis of estimated taxable income for the accounting year in accordance with theIncome Tax Act, 1961.Deferred taxation:The deferred tax charge or credit and the corresponding deferred tax liabilities and assets are recognized using the tax ratesthat have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to theextent there is reasonable certainty that the asset can be realised in future; however, where there is unabsorbed depreciationor carried forward loss under taxation laws, deferred tax assets are recognized only if there is a virtual certainty of realisationof the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect theamount that is reasonable/virtually certain (as the case may be) to be realised.1.11 Preliminary Expenses:Preliminary expenses are charged to the Profit and Loss Account in the year in which they are incurred.1.12 Provisions and Contingencies:The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflowof resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is madewhen there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote,no provision or disclosure is made.Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probablethat the outflow of resources would be required to settle the obligation, the provision is reversed.Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and ifit is virtually certain that an economic benefit will arise, the asset and related income are recognized in the period in which thechange occurs.1.13 Commercial Paper:The liability is recognised at face value at the time of issue of commercial paper. Discount on commercial paper is amortizedover the tenure of the commercial paper.II Notes to Accounts: -2.1 Nature of Business:The Company is Non-banking Financial Company registered with the Reserve Bank of India (“RBI”) under Section 45-IA of theReserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the Certificateof Registration from the RBI on 5th April, 2006, enabling the Company to carry on business as a Non-banking FinanceCompany.In accordance with the provisions of Section 45-IC of the RBI Act, 1934, the Company has created a Reserve Fund & duringthe year, the Company has transferred an amount of R 85,319.31 in thousands (Previous Year R 84,791.21 in thousands) toReserve Fund, it being 20% of the Profit After Tax.2.2 Contingent Liabilities:The company has given corporate guarantees (Net of Margins) of R 12,500.00 in thousands. (Previous Year: R 47,250.00 inthousands) to various banks for its subsidiary Motilal Oswal Commodity Brokers Pvt. Ltd. & R Nil (Previous Year: R 150,000.00in thousands) to Punjab National Bank for its subsidiary Motilal Oswal Securities Limited.Demand in respect of Income Tax matters for which appeal is pending is R 656.17 in thousands (Previous Year R 2,498.56 inthousands). This is disputed by the Company and hence not provided for in the books of accounts.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 71

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)2.3 Employees’ Stock Options Scheme (ESOS) :During the year the Company has granted 2,044,000 (Previous Year 1,747,500) Employee Stock Options to various employeesof the Company and its subsidiary Companies.The Company has adopted intrinsic value method of accounting Employee Compensation Cost in respect of ESOS. The intrinsicvalue of shares is excess of market price of the shares under ESOS over the exercise price. Employee Compensation Costis accounted for by amortizing the intrinsic value on the straight line basis over the vesting period. The total amount to beamortized as at March 31, 2011 over the balance vesting period is R 255.01 in thousands (Previous Year- R 492.77 inthousands).2.4 Commercial paper & Non-convertible debentures:The maximum balance outstanding during the year in respect of commercial paper & Non convertible debentures wasR 3,250,000.00 in thousands (R 1,000,000.00 in thousands in the previous year) & R 1,450,000.00 in thousands(R 1,100,000.00 in thousands in the previous year) respectively.2.5 Auditor’s Remuneration (inclusive of Service Tax) : -(R in ‘000)Particulars 2010-11 2009-10As Auditors:Audit Fees 400.00 400.00Tax Audit Fees 25.00 25.00Out of pocket expenses 8.55 6.01In any other capacity, in respect of:Other Certification 170.00 60.00Service Tax 62.17 50.57Total 665.72 541.592.6 Deferred tax Assets/(Liability) for the year comprise timing differences on account of:(R in ‘000)Particulars 2010-11 2009-10Deferred Tax LiabilityWDV of fixed assets (249.27) (6.34)Interest Capitalised (25,546.12) (11,768.45)Deferred Tax Asset– 55.23Preliminary expensesProvision for Standard Assets 2,399.74 –Provision for Gratuity 357.54 184.54Net Deferred Tax Asset/ (Liability) (23,039.11) (11,535.02)2.7 Basic & Diluted Earnings/(Loss) per share:Particulars 2010-11 2009-10Net Profit attributable to equity shareholders [A] (R) 426,596.54 423,956.07Weighted Average of equity shares issued [B] (face value of R 1 each) 143,920,076 142,681,601Basic Earnings per share [A/B] (R) 2.96 2.97Weighted Number of equity shares outstanding for Diluted EPS [C] 143,961,260 142,830,473Diluted Earnings per share [A/C] (R) 2.96 2.9772FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)2.8 Related Party Disclosure :I. Names of Related Parties :- (as certified by Management)A) Enterprises where control exists:Subsidiary companies:a) Motilal Oswal Securities Limitedb) Motilal Oswal Investment Advisors Private Limitedc) Motilal Oswal Private Equity Advisors Private Limitedd) Motilal Oswal Commodities Broker Private Limitede) Motilal Oswal Capital Market Private Limitedf) Antop Traders Private Limitedg) Motilal Oswal Insurance Brokers Private Limitedh) Motilal Oswal Asset Management Company Limitedi) Motilal Oswal Trustee Company LimitedB) Enterprises in which Key Managerial Personnel exercise Significant Influence:a) Passionate Investment Management Private Limitedb) Nagori Agro & Cattle Feeds Private Limitedc) Rishabh Securities Private Limitedd) Windwell Securities Private Limitede) Textile Exports Private Limitedf) Raamdeo Agrawal (HUF)C) Key Management Personnel:Mr. Motilal Oswal - Chairman & Managing DirectorMr. Raamdeo Agrawal - Joint Managing DirectorD) Relatives of Key Management Personnel:a) Suneeta Agrawal - Wife of Joint Managing Directorb) Vimla Oswal - Wife of Chairman & Managing DirectorMOTILAL OSWAL FINANCIAL SERVICES LIMITED 73

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)II.Transactions with related partiesTransaction Name of the related Party Subsidiaries Enterprises in which KeyManagerial Personnelexercise SignificantInfluenceKey ManagerialPersonnel/Relativeof Key ManagerialPersonnel(R in ‘000)Total2010-11 2009-10 2010-11 2009-10 2010-11 2009-10 2010-11 2009-10Business Support Motilal Oswal Securities Limited (900.00) (900.00) – – – – (900.00) (900.00)ServiceMotilal Oswal Securities Limited 600.00 600.00 – – – – 600.00 600.00Interest Motilal Oswal Securities Limited (6,254.51) (1,144.50) – – – – (6,254.51) (1,144.50)Motilal Oswal Commodities Broker Private Limited (14.30) (99.94) – – – – (14.30) (99.94)Motilal Oswal Asset Management Company Limited (9.99) (28.89) – – – – (9.99) (28.89)Motilal Oswal Insurance Brokers Private Limited (0.99) (0.25) – – – – (0.99) (0.25)Motilal Oswal Capital Markets Private Limited (3,485.14) (1,404.34) – – – – (3,485.14) (1,404.34)Motilal Oswal Investment Advisors Private Limited (12.40) (206.91) – – – – (12.40) (206.91)Motilal Oswal Private Equity Advisors Private Limited (10.32) (38.41) – – – – (10.32) (38.41)Managerial Remuneration Raamdeo Agrawal – – – – 10,000 – 10,000.00 –Referal Fees Motilal Oswal Investment Advisors Private Limited 6,450.30 – – – – – 6,450.30 –Rent Motilal Oswal Securities Limited 180.00 – – – – – 180.00 –Brokerage Motilal Oswal Securities Limited 3,584.06 5,392.39 – – – – 3,584.06 5,392.39Redemption of Motilal Oswal Commodities Broker Private Limited (6,000.00) – – – – – (6,000.00) –Preference SharesSubscription of Motilal Oswal Asset Management Company Limited – 52,500.00 – – – – – 52,500.00Equity Shares Motilal Oswal Insurance Brokers Private Limited – 9,900.00 – – – – – 9,900.00Sale of Equity Shares Motilal Oswal Securities Limited – (52,500.00) – – – – – (52,500.00)Dividend Motilal Oswal Investment Advisors Private Limited (134,062.50) (83,625.00) – – – – (134,062.50) (83,625.00)Motilal Oswal – – – – 28,419.77 19,746.51 28,419.77 19,746.51Raamdeo Agrawal – – – – 28,113.72 18,742.48 28,113.72 18,742.48Raamdeo Agrawal (HUF) – – – – 780.00 520.00 780.00 520.00Suneeta Agrawal – – – – 354.48 256.32 354.48 256.32Vimla Oswal – – – – 150.29 100.19 150.29 100.19Passionate Investment Management Private Limited – – 61,200.00 40,000.00 – – 61,200.00 40,000.00Employee’s Stock Motilal Oswal Asset Management Company Limited – 20,000.00 – – – – – 20,000.00Option (In Nos.) Motilal Oswal Commodities Broker Private Limited – 22,500.00 – – – – – 22,500.00Motilal Oswal Insurance Brokers Private Limited – 15,000.00 – – – – – 15,000.00Motilal Oswal Securities Limited 1,979,000.00 1,537,500.00 – – – – 1,979,000.00 1,537,500.00LoansMotilal Oswal Securities Limited 690,983.00 300,574.62 – – – – 690,983.00 300,574.62(Maximum Motilal Oswal Commodities Broker Private Limited 30,000.00 20,001.88 – – – – 30,000.00 20,001.88balance)Motilal Oswal Asset Management Company Limited 7,000.00 2,500.67 – – – – 7,000.00 2,500.67Motilal Oswal Insurance Brokers Private Limited 508.62 100.00 – – – – 508.62 100.00Motilal Oswal Capital Markets Private Limited 88,639.52 47,382.70 – – – – 88,639.52 47,382.70Motilal Oswal Investment Advisors Private Limited 26,058.44 20,783.44 – – – – 26,058.44 20,783.44Motilal Oswal Private Equity Advisors Private Limited 23,000.00 6,025.60 – – – – 23,000.00 6,025.60Outstanding Balances:Corporate Motilal Oswal Securities Limited – 150,000.00 – – – – – 150,000.00Guarantees Motilal Oswal Commodities Broker Private Limited 12,500.00 47,250.00 – – – – 12,500.00 47,250.00Loans & Advances Motilal Oswal Capital Markets Private Limited – 43,381.21 – – – – – 43,381.21Motilal Oswal Investment Advisors Private Limited – 58.44 – – – – – 58.44Motilal Oswal Private Equity Advisors Private Limited – 4.22 – – – – – 4.22Note: ‘Income / receipts figures are shown in brackets.74FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)2.9 Segment Reporting:The Company is engaged in single segment of Fund based activities and there are no separate reportable segments as definedin AS – 17.2.10 Provisions made for the year ended 31st March, 2011 comprises of:(R in ‘000)ParticularsOpening balance as on01. 04.2010Provided on31.03.2011Provision reversed /paid the year ended31.03.2011Closing balance as of31.03.2011Ex-gratia 4,719.69 2,203.43 4,551.69 2,371.43Provision for Gratuity 555.50 546.33 – 1,101.832.11 Open Interest in Individual Stock Futures as on 31st March, 2011Open Long Positions:Name of the Company Expiry Date No. of Contract No. of UnitsHindustan Zinc Ltd. 28/04/2011 2 5,000Lupin Limited 28/04/2011 1 1,000NIFTY 30/06/2011 657 32,8502.12 Options open interest:(R in ‘000)Name of Equity Index / Stock Options Total premium carried forward as at the year end net of provisions madeNIFTY 30,350.122.13 Initial Margin:Initial margin for open positions in respect of Futures and Options is R 31,482.14 in thousands (Previous Year R 2,75,997.56in thousands) which includes non-cash component (i.e. collateral).2.14 The company pledges Stock in Trade towards margin requirement for trading / arbitrage in equity / derivatives.2.15 During the year, CRISIL Limited assigned the Credit Rating of ‘P1+’ (pronounced ‘P One Plus’) to the Short Term DebtProgramme of R 4,000,000.00 in thousands of the Company.2.16 The following table set out the gratuity plan as required under AS 15.Reconciliation of opening and closing balances of the present value of the defined benefit obligation.Method: Projected Unit Credit MethodAssumptions 2010-11 2009-10Discount Rate 8% p.a. 8% p.a.Expected Return On Plan Assets n/a n/aMortality L.I.C. 1994-96 ULTIMATE L.I.C. 1994-96 ULTIMATEFuture Salary Increases 15% p.a. 15% p.a.Disability nil nilAttrition 20% p.a. 20% p.a.Retirement 55 yrs. 55 yrs.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 75

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)Changes in the Present Value of the Obligation and in the Fair Value of the Assets(R in ‘000)Mar-11Mar-10Present Value Of obligation 01-04-2010 555.50 369.47Interest Cost 44.44 29.56Current Service Cost 367.61 209.16Past Service Cost 336.26 0Benefits Paid 0 0Actuarial (gain) loss on Obligation (201.98) (52.68)Present Value Of obligation 31-03-2011 1,101.83 555.50Total Actuarial gain (loss) to be recognised 201.98 52.68Balance Sheet RecognitionPresent Value Of Obligation 1,101.83 555.50Fair Value of Plan Assets 0 0Liability (assets) 1,101.83 555.50Unrecognised Past Service Cost 0 0Liability (asset) recognised in the Balance Sheet 1,101.83 555.50Profit & Loss - ExpensesCurrent Service Cost 367.61 209.16Interest Cost 44.44 29.56Expected Return on plan assets 0 0Net Actuarial gain (loss) recognised in the year (201.98) (52.68)Past Service Cost 336.26 0Expenses Recognised in the statement of Profit & Loss 546.33 186.03Opening Net Liability 555.50 369.47Expenses 546.33 186.03Contribution 0 0Closing Net Liability 1,101.83 555.50DataNo. 7 7Avg. Age (yrs.) 42 yrs. 38 yrs.Avg. PS (yrs.) 3 yrs. 3 yrs.Avg. Sal (R in ‘000) 173.61 52.5376FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)2.17 Capital Commitment:1. Out of the capital commitment of 10% (subject to maximum limit of R 450,000.00 in thousands) is given by the Companyin respect of total capital commitment of Business Excellence Trust, the Trust sponsored by the Company under the IndianTrust Act, 1982. The Company has contributed an amount of R 405,000.00 in thousands towards its capital contributionas per the draw down intimations received from the Fund & an advance of R 3,375.00 in thousands against future drawdown.2. During the year, the Company has given total capital commitment of R 250,000.00 in thousands in respect of BusinessExcellence Trust II, the Trust sponsored by the Company under the Indian Trust Act, 1982.3. The Company has given a capital commitment of an amount of R 150,000.00 in thousands to India Realty ExcellenceFund launched by Realty Excellence Trust. In respect to this, the Company has contributed an amount of R 90,000.00 inthousands as per the draw down intimations received from the Fund & an advance of R 1,000.00 in thousands againstfuture draw down.4. During the year, the Company has given total capital commitment of R 250,000.00 in thousands to India Realty ExcellenceFund II launched by Reality Excellence Trust.5. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) isR 259,087.53 in thousands (Previous Year: R 25,467.34 in thousands).6 Disclosures, relating to amounts unpaid as at the year end together with interest paid / payable as required under theMicro, Small and Medium Enterprise Development Act, 2006 have been given to the extent Group has received intimationfrom “Suppliers” regarding their status under the said Act.7 Company, jointly with its subsidiary company (Motilal Oswal Securities Limited), had acquired land & building situated atPrabhadevi, Mumbai. The company continued constructing additional building space (jointly with its subsidiary company)on the existing land/building structure for its corporate office. The Company has, during the year, capitalized interest ofR 43,298.77 (Previous Year R 35,425.79 in thousands) in thousands attributed to capital work-in-progress, which is inaccordance with Accounting Standard on ‘Borrowing Costs’ (AS-16) issued by the Institute of Chartered Accountants ofIndia. The said Accounting Standard specifies that interest on funds that are borrowed generally (for working capital) andused for the purpose of obtaining a qualifying asset are costs that are eligible for capitalisation. The amount of borrowingcosts (interest) attributable to the qualifying asset is determined by applying the weighted average rate of borrowingsoutstanding to the asset expenditures (‘qualifying assets’).8 During the current year, Company has made a provision R 7,392.11 in thousands being 0.25% of its standard assets asper the Notification No. DNBS.222/CGM(US)-2011 dated 17th January, 2011 issued by RBI.2.18 Managerial Remuneration:Managerial remuneration paid to the Directors is as follows:(R in ‘000)Particulars 2010-11 2009-10Salary 10,000.00 –MOTILAL OSWAL FINANCIAL SERVICES LIMITED 77

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)Computation of Managerial Remuneration under section 198 of the Companies Act, 1956:(R in ‘000)Particulars 2010-11 2009-10Profit Before Tax 565,448.74 573,100.37Additions:Depreciation charged in the books 74.79 19.69Provision for Doubtful Debts 7,392.11 4,175.97Managerial Remuneration debited to Profit & Loss 11,300.00 –Loss on sale of Investments 1,554.22 –Sub-total of Additions (A) 585,769.86 577,296.03Subtractions:Depreciation in accordance with section 350 of the Companies Act, 1956 74.79 19.69Profit on Sale of Investment – 12,423.28Sub-total of Subtractions (B) 74.79 12,442.97Net Profit under section 198 of the Companies Act, 1956 (A) – (B) 585,695.07 564,853.06Maximum Managerial Remuneration @ 10% of Net Profit 58,569.51 56,485.312.19 In the opinion of the board of directors, all current assets, loans & advances would be realizable at least of an amount equalto the amount at which they are stated in the Balance Sheet. Hence no impairment loss recognised on fixed assets.2.20 Foreign Currency Transactions:Expenditure in Foreign Currency (on accrual basis):(R in ‘000)Particulars 2010-11 2009-10Travelling Expenses – 4.30TOTAL – 4.302.21 Quantitative information in respect of income from arbitrage(R in ‘000)Cash Segment 31-Mar-11 31-Mar-10Quantity Amount Quantity AmountOpening (A) 2,429,339 1,082,619.48 2,157,772 327,213.68Purchase (B) 225,173,389 74,076,046.37 196,204,088 64,870,138.43Sales (C) 227,567,299 74,155,782.82 195,932,521 64,114,732.64Closing (D) 35,429 2,883.03 2,429,339 1,082,619.482.22 Disclosure as per guidelines for NBFC-ND-SI as regards capital adequacy, liquidity and disclosure normsCRARParticulars 2010-11 2009-10CRAR % 93.21 83.03CRAR - Tier I Capital % 93.08 83.03CRAR - Tier II Capital % 00.13 –78FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)Exposure to real estate sectorCategory Current Year Previous Yeara) Direct exposure(i) Residential Mortgages -Lending fully secured by mortgages on residential property that is or will beoccupied by the borrower or that is rented; (Individual housing loans up to R15lakh may be shown separately)NILNIL(ii) Commercial Real Estate -Lending secured by mortgages on commercial real estates (office buildings, retailspace, multipurpose commercial premises, multi-family residential buildings,multi-tenanted commercial premises, industrial or warehouse space, hotels, landacquisition, development and construction, etc.). Exposure would also includenon-fund based (NFB) limits;(iii) Investments in Mortgage Backed Securities (MBS) and other securitized exposuresa. Residential, NIL NILb. Commercial Real Estate. NIL NILb) Indirect ExposureFund based and non-fund based exposures on National NIL NILHousing Bank (NHB) and Housing Finance Companies (HFCs). NIL NILNote - The Company has invested R 90,000.00 in thousands (Previous Year R 37,500.00 in thousands) in RET & R Nil (PreviousYear R 29,100.00 in thousands) in other propertiesAsset Liability ManagementMaturity Pattern of Certain Items of assets and liabilities(R in ‘000)1 day to30/31 days(One month)Over Onemonth to2 monthsOver 2month to3 monthsOver 3month to6 monthsOver 6months toone yearOver oneyear to 3yearsNILOver3 to 5yearsOver 5yearsLiabilitiesBorrowing from Banks – – – – – – – – –Market Borrowings – – – – – – – – –AssetsAdvances 502,598 - 184,653 414,128 1,642 1,853,822 – – 2,956,843Investments – – – – – – – 832,626 832,6262.23 Previous year’s figures have been regrouped, rearranged, reclassified to the extent considered necessary.NILTotalFor and on behalf of the Board ofMOTILAL OSWAL FINANCIAL SERVICES LTD.Place : MumbaiDated : 30th April, 2011Samrat Sanyal Motilal Oswal Raamdeo AgrawalCompany Secretary Chairman & Managing Director Joint Managing DirectorMOTILAL OSWAL FINANCIAL SERVICES LIMITED 79

ANNEXURESchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)Accounting Year: 2010-2011ANNEXURE ISchedule to the Balance Sheet of Motilal Oswal Financial Services Limited(as required in terms of Paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms(Reserve Bank) Directions, 2007)(R in ‘000)(1)(2)PARTICULARSLIABILITIES SIDE :Loans and Advances availed by the NBFCs inclusive ofinterest accrued thereon but not paid:(a) Debentures : Secured: Unsecured(other than falling within the meaning ofpublic deposits*)(b) Deferred Credits(c) Term Loans(d) Inter-corporate loans and borrowing(e) Commercial Paper(f) Other Loans* Please see Note 1 belowASSETS SIDE :Break-up of Loans and Advances including bills receivables[other than those included in (4) below] :(a) Secured(b) Unsecured(3) Break up of Leased Assets and stock on hire andhypothecation loans counting towards AFC activities(i) Lease assets including lease rentals under sundry debtors :(a) Financial lease(b) Operating lease(ii) Stock on hire including hire charges under sundry debtors:(a) Assets on hire(b) Repossessed Assets(iii) Other loans counting towards AFC activities(a) Loans where assets have been repossessed(b) Loans other than (a) above(4) Break-up of Investments :Current Investments :1. Quoted :(i) Shares : (a) Equity(b) Preference(ii) Debentures and Bonds(iii) Units of mutual funds(iv) Government Securities(v) Others (Please specify)Amountout-standingNILNILNILNILNILNILNILAmount outstanding2,657,507.771,019,518.483,677,026.25NILNILNILNILNILNILNILNILNILNILNILNILAmountoverdueNILNILNILNILNILNILNIL80FINANCIAL STATEMENT 2010 - 2011

ANNEXURESchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)PARTICULARS2. Unquoted :(i) Shares : (a) Equity(b) Preference(ii) Debentures and Bonds(iii) Units of mutual funds(iv) Government Securities(v) Others (Please specify)Long Term investments :1. Quoted :(i) Share : (a) Equity(b) Preference(ii) Debentures and Bonds(iii) Units of mutual funds(iv) Government Securities(v) Others (Please specify)2. Unquoted :(i) Shares : (a) Equity(b) Preference337,626.07NIL(ii) Debentures and BondsNIL(iii) Units of mutual fundsNIL(iv) Government SecuritiesNIL(v) Others (Please specify)495,000.00TOTAL 832,626.07(5) Borrower group-wise classification of assets financed as in(2) and (3) above : Please see Note 2 belowCategory1. Related Parties **(a) Subsidiaries(b) Companies in the same group(c) Other related parties2. Other than Related PartiesNILNILNILNILNILNILNILNILNILNILNILNIL(R in ‘000)Amount net of provisionsSecured Unsecured TotalNIL NIL NILNIL NIL NILNIL NIL NIL2,657,507.77 1,019,518.48 3,677,026.25TOTAL 2,657,507.77 1,019,518.48 3,677,026.25(6) Investor group-wise classification of all investments (currentand long term) in shares and securities (both quoted andunquoted): Please see note 3 belowCategoryMarket Value / Break up Book Value1. Related Parties **or fair value or NAV (Net of Provisions)(a) Subsidiaries6,053,438.55 337,626.07(b) Companies in the same groupNILNIL(c) Other related partiesNILNIL2. Other than Related PartiesNILNILTOTAL 6,053,438.55 337,626.07** As per Accounting Standard of ICAI (Please see Note 3)MOTILAL OSWAL FINANCIAL SERVICES LIMITED 81

ANNEXURESchedule S : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd...)PARTICULARS(7) Other information(i) Gross Non-Performing Assets(a) Related Parties(b) Other Than Related Parties(ii) Net Non-Performing Assets(a) Related Parties(b) Other Than Related Parties(iii) Assets acquired in satisfaction of debtNotes:1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)Directions, 1998.2. Provisioning norms shall be applicable as prescribed in Non-Banking Financial (Non-Deposit Accepting or Holding) CompaniesPrudential Norms (Reserve Bank) Directions, 2007.3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of investments and otherassets as also assets acquired in satisfaction of debt. However, market value in respect of quoted investments and break up/fairvalue / NAV in respect of unquoted investments should be disclosed irrespective of whether they are classified as long term orcurrent in column (5) above.NILNILNILNILNILNILNIL(R in ‘000)82FINANCIAL STATEMENT 2010 - 2011

AUDITORS’ REPORTTo,The Board of DirectorsMotilal Oswal Financial Services LimitedAs required by the “Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Direction, 2008” issued by ReserveBank of India (the Bank), and based on the books and records verified by us and according to the information and explanationgiven to us during the course of our audit, we give hereunder our report on the matters specified in paragraphs 3 of the saiddirections for MOTILAL OSWAL FINANCIAL SERVICES LIMITED (“the Company”).a) The Company is engaged in the business of Non Banking Finance Institution and it has obtained Certificate of RegistrationNo. N-13.01830 dated 5th April, 2006 from Reserve Bank of India.b) In our opinion and as per the information and explanation given to us, the Company is entitled to hold such certificate ofregistration in terms of its asset income pattern as on 31st March, 2011.c) Based on the criteria set forth by the Reserves Bank of India in Company Circular No. DNBS.PD. CC No. 85/03.02.089/2006-07 dated December 6, 2006 for classification of NBFCs as Asset Finance Company (AFC) and as per the informationand explanations given to us and as appears from the books of accounts of the Company, the Company is not an AssetFinance Company (AFC) as defined in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)Directions, 1998 with reference to the business carried on by it during the financial year 2010-11.d) The Board of Directors at its meeting held on 27th April, 2010 has passed a resolution for non- acceptance of any publicdeposits.e) As per the information and explanations given to us and as appears from the books of accounts of the Company, theCompany has not accepted any public deposit during the financial year 2010-11.f) In our opinion and as per the information and explanations given to us, the company has complied with the prudentialnorms relating to income recognition, accounting standards, asset classification and provisioning for bad and doubtfuldebts as applicable to it in terms of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies PrudentialNorms (Reserve Bank) Directions, 2007 for the year ended on March 31, 2011.g) In our opinion and as per the examination of books of account and relevant records, the capital adequacy ratio asdisclosed in the return submitted to the Bank in form NBS-7, has been correctly arrived at and such ratio is in compliancewith the minimum CRAR prescribed by the Reserves Bank of India and the Company has furnished to the Bank the annualstatement of capital funds, risk assets / exposures and risk asset ratio (NBS-7) within the stipulated period.For HARIBHAKTI & CO.Chartered AccountantsFirm Registration No. 103523WPlace: MumbaiDate: 20th June, 2011.Rakesh RathiPartnerMembership No. 45228MOTILAL OSWAL FINANCIAL SERVICES LIMITED 83

BALANCE SHEET ABSTRACTBalance Sheet Abstract and Company’s General Business ProfileAdditional Information Pursuant to the Provisions of Part IV of the Schedule VI of the Companies Act, 1956I Registration DetailsRegistration No. L67190MH2005PLC153397 State Code 11Balance Sheet Date 31 03 2011Day Month YearII Capital Raised during the year (R in Thousands)Public IssueRight IssueNilNilBonus IssuePrivate PlacementNil 33,828III Position of Mobilisation and Development of funds (R in Thousands)Sources of fundsTotal LiabilitiesTotal Assets5,901,785 5,901,785Paid-up CapitalReserve and Surplus144,419 748Secured LoansUnsecured LoansNilNilDeferred Tax Liability23,039Application of fundsNet Fixed AssetsInvestments1,372,960 832,626Net Current AssetsMisc. Expenditure2,943,206 NilIV Performance of the Company (R in Thousands)TurnoverTotal Expenditure642,457 77,008Profit before TaxProfit After Tax565,449 426,597Earning per Share in R Dividend Rate %2.96 140%V Generic Names of the Principal Products / Services of the Company(As per Monetary items)Item Code No. (ITC Code)Product DescriptionInvestment & Finance ActivitiesFor and on behalf of the Board ofMOTILAL OSWAL FINANCIAL SERVICES LTD.Place : MumbaiDated : 30th April 2011Samrat Sanyal Motilal Oswal Raamdeo AgrawalCompany Secretary Chairman & Managing Director Joint Managing Director84FINANCIAL STATEMENT 2010 - 2011

AUDITORS’ REPORTAuditors’ Report to the Board of Directors of the Motilal Oswal Financial Services Limited on theConsolidated Financial Statements1. We have audited the attached Consolidated Balance Sheet of MOTILAL OSWAL FINANCIAL SERVICES LIMITED (“theCompany”) and its subsidiaries (collectively referred to as “the Group”) as at March 31, 2011 and also the ConsolidatedProfit and Loss Account and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. Thesefinancial statements are the responsibility of the Company’s Management and have been prepared by the managementon the basis of separate financial statements and other financial information regarding components. Our responsibility isto express an opinion on these consolidated financial statements based on our audit.2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.3. We did not audit the financial statements of six subsidiaries whose financial statements reflect total assets of R 11,147.28(in lakhs) as at March 31, 2011, total revenue of R 7,162.16 (in lakhs) and cash outflow of R 776.47 (in lakhs) for theyear then ended. These financial statements and other financial information have been audited by other auditors whosereports have been furnished to us and our opinion is based solely in the report of the other auditors.4. We report that the consolidated financial statements have been prepared by the Company’s management in accordancewith the requirements of Accounting Standard (AS) 21, “Consolidated Financial Statements”, as notified pursuant to theCompanies (Accounting Standard) Rules, 2006 and on the basis of the separate financial statements of Motilal OswalFinancial Services Limited and its subsidiaries.5. Based on our audit and on consideration of reports of other auditors on separate financial statements and on the otherfinancial information of the components, and to the best of our information and according to the explanation given to us,we are of the opinion that the attached consolidated financial statements give a true and fair view in conformity with theaccounting principles generally accepted in Indiaa. in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at March 31, 2011;b. in the case of the Consolidated Profit and Loss Account, of the profit for the year ended on that date; andc. in the case of Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date.For HARIBHAKTI & CO.Chartered AccountantsFirm Registration No. 103523WPlace: MumbaiDate: 30th April, 2011Rakesh RathiPartnerMembership No. 45228MOTILAL OSWAL FINANCIAL SERVICES LIMITED 85

BALANCE SHEETConsolidated Balance Sheet as at 31st March, 2011ScheduleNo.As at 31-Mar-11(R in Lakhs)As at 31-Mar-10(R in Lakhs)SOURCES OF FUNDSShare Holders’ Fund :Share Capital A 1,444.19 1,431.72ESOP Outstanding B 7.48 5.32Reserves and Surplus C 104,499.10 93,160.50105,950.77 94,597.54Loan Funds :Secured Loans D – 2,500.07Unsecured Loans E – 8,331.51– 10,831.58Minority Interest F 517.75 410.36Deferred Tax Liability (Net) 15.05 –TOTAL SOURCES OF FUNDS 106,483.57 105,839.47APPLICATION OF FUNDS :Fixed Assets :Gross Block G 17,499.39 16,636.08Less:- Depreciation 8,536.79 7,371.24Net Block 8,962.59 9,264.83Capital work-in-progress (including Capital Advances ) 19,980.74 14,732.4328,943.34 23,997.26Investments H 5,883.93 5,140.90Deferred Tax Asset (Net) – 314.69Current Assets, Loans and Advances :Sundry Debtors I 43,621.52 30,590.97Stock-in-trade J 18,749.70 30,548.50Cash & Bank Balances K 26,651.48 43,334.84Loans & Advances L 61,607.70 49,374.37Other Current Assets M 410.95 549.16(i) 151,041.35 154,397.83Less : Current Liabilities and Provisions :Current Liabilities N 56,076.85 53,960.62Provisions O 23,308.19 24,050.59(ii) 79,385.04 78,011.21Net Current Assets (i)-(ii) 71,656.31 76,386.62TOTAL APPLICATION OF FUNDS 106,483.57 105,839.47Significant Accounting Policies & Notes to AccountsVSchedules referred to above form an integral part of the Consolidated Financial StatementsAs per our Attached Report of Even DateFor Haribhakti & Co.For and on behalf of the Board ofChartered AccountantsMOTILAL OSWAL FINANCIAL SERVICES LTD.Rakesh Rathi Samrat Sanyal Motilal Oswal Raamdeo AgrawalPartner Company Secretary Chairman & Managing Director Joint Managing DirectorM.No. 045228Place : MumbaiDated : 30th April, 201186CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

PROFIT AND LOSS ACCOUNTConsolidated Profit and Loss Account for the year ended 31st March, 2011ScheduleNo.For the yearended 31-Mar-11(R in Lakhs)For the yearended 31-Mar-10(R in Lakhs)INCOMEIncome from Operations P 58,969.71 62,501.05Other Income Q 1,067.42 2,031.43TOTAL (A) 60,037.14 64,532.49EXPENDITUREOperating Expenses R 14,551.46 16,296.47Personnel Expenses S 14,218.88 13,665.75Administrative & Other Expenses T 8,310.97 6,871.83TOTAL (B) 37,081.31 36,834.05Profit Before Depreciation, Interest and Taxation (C) = (A) - (B) 22,955.82 27,698.44Depreciation (D) G 1,312.78 1,418.88Profit Before Interest and Taxation (E) = (C ) - (D) 21,643.05 26,279.56Interest & Finance Charges (F) U 568.94 962.37Profit before Taxation, Exceptional Items (G) = (E) - (F) 21,074.11 25,317.19Exceptional Items (Income) / Expense - (5.66)Profit before Taxation 21,074.11 25,322.85Less: Provision for Taxationi) For current yearCurrent tax 6,724.68 8,018.70Deferred tax (Asset) / Liability 329.73 (179.00)Wealth Tax 3.49 1.88ii) For Previous year(s) 65.73 39.167,123.63 7,880.74Profit after Tax before Minority Interests 13,950.47 17,442.10Less : Minority Interests Profit 244.44 397.44Profit after Tax (PAT) & Minority Interests 13,706.03 17,044.65Balance brought forward from previous year 41,897.70 28,208.96Profit Available For Appropriations 55,603.73 45,253.62AppropriationsTransfer to Statutory Reserve for the year (853.19) (847.91)Transfer to Capital Redemption Reserve (60.00) –Preacquisition (Profit) / Loss – 51.17Proposed Dividend (2,154.38) (1,718.07)Provision for Proposed Dividend Distribution Tax (676.03) (285.35)Transfer to General Reserve (1,564.47) (555.77)Balance Carried to Balance Sheet 50,295.65 41,897.70Consolidated Earnings Per share (R)Basic Earnings per share (Face Value of share R 1 each) 9.52 11.91Diluted Earnings per share (Face Value of share R 1 each) 9.52 11.90Significant Accounting Policies & Notes to AccountsSchedules referred to above form an integral part of the Consolidated Financial StatementsAs per our Attached Report of Even DateFor Haribhakti & Co.Chartered AccountantsVFor and on behalf of the Board ofMOTILAL OSWAL FINANCIAL SERVICES LTD.Rakesh Rathi Samrat Sanyal Motilal Oswal Raamdeo AgrawalPartner Company Secretary Chairman & Managing Director Joint Managing DirectorM.No. 045228Place : MumbaiDated : 30th April, 2011MOTILAL OSWAL FINANCIAL SERVICES LIMITED 87

CASH FLOWConsolidated Cash Flow Statement for the year ended 31st March, 2011ParticularsFor the Year Ended31st March, 2011(R in Lakhs)For the Year Ended31st March, 2010(R in Lakhs)CASH FLOW FROM OPERATING ACTIVITIESProfit before Taxation and Extraordinary Items 21,074.11 25,322.84Add : 1) Depreciation / Amortisation 1,312.78 1,418.882) Loss on Sale of Fixed Assets – 28.913) Employee Stock Option Compensation Cost 2.27 2.804) Interest Paid 453.40 1,768.45 677.77 2,128.3622,842.55 27,451.20Less : 1) Interest Received 90.43 16.712) Profit on Sale of Investments 155.59 1,122.653) Profit on Sale of Fixed Assets 330.28 –4) Reversal of Provision for diminution in investments – 5.665) Dividend Received 459.38 1,035.68 905.82 2,050.84OPERATING PROFIT 21,806.87 25,400.36Adjustment for Changes in working capital :1) (Increase) / Decrease In Sundry Debtors (13,030.55) (7,478.72)2) (Increase) / Decrease In Stock-in-trade 11,798.80 (20,906.64)3) (Increase) / Decrease In Loans & Advances (12,950.19) (3,943.38)4) (Increase) / Decrease In Other Current Assets 138.22 25.915) Increase / (Decrease) In Current Liabilities & Provisions 2,338.41 (11,705.31) 11,426.32 (20,876.52)CASH GENERATED FROM OPERATIONS 10,101.56 4,523.84Taxes Paid (7,506.98) (7,968.61)NET CASH FLOW FROM OPERATING ACTIVITIES (A) 2,594.58 (3,444.76)CASH FLOW FROM INVESTING ACTIVITIESPurchase of Investments (831.43) (1,552.50)Sale of Investments 1,243.99 2,404.12Purchase of subsidiary (1,000.00) (11.31)Purchase of Fixed Assets (including Capital WIP) (6,433.83) (18,059.05)Sale of Fixed Assets 505.26 60.31Interest Received 90.43 16.71Dividend Received 459.38 905.82NET CASH FLOW FROM INVESTING ACTIVITIES (B) (5,966.20) (16,235.90)CASH FLOW FROM FINANCING ACTIVITIESIssue of Share capital 2.63 1.63Received of Securities Premium 335.66 174.09Proceeds / (Repayments) of Borrowings (10,831.58) 10,826.37Dividend Paid (2,028.19) (1,414.91)Dividend Distribution Tax Paid (336.86) (240.46)Interest Paid (453.40) (677.77)NET CASH FLOW FROM FINANCING ACTIVITIES (C) (13,311.74) 8,668.94Net Cash Flow For The Year Ended (A+B+C) (16,683.36) (11,011.72)Cash & Cash Equivalents as at beginning of year:Cash as at beginning of year 43,334.84 54,346.56Total Cash & Cash Equivalents as at beginning of year 43,334.84 54,346.56Cash & Cash Equivalents as at end of year :Cash as at end of year 26,651.48 43,334.84Total Cash & Cash Equivalents as at end of year 26,651.48 43,334.84As per our Attached Report of Even DateFor Haribhakti & Co.For and on behalf of the Board ofChartered AccountantsMOTILAL OSWAL FINANCIAL SERVICES LTD.Rakesh Rathi Samrat Sanyal Motilal Oswal Raamdeo AgrawalPartner Company Secretary Chairman & Managing Director Joint Managing DirectorM.No. 045228Place : MumbaiDated : 30th April, 201188CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule A : Share CapitalAs at 31-Mar-11(R in Lakhs)As at 31-Mar-10(R in Lakhs)Authorised870,000,000 Equity Shares of R 1 each 8,700.00 8,700.0050,00,000 Redeemable Preference Shares of R 100 each 5,000.00 5,000.00TOTAL 13,700.00 13,700.00Issued, Subscribed & Paid-Up144,419,229 Equity Shares of R 1/- each fully paid-up1,444.19 1,431.72(PY 143,172,216 Equity Shares of R 1/- each fully paid-up)[Includes allotment of 19,73,529 Equity Shares forconsideration other than cash (Previous Year - 989,066)]TOTAL 1,444.19 1,431.72Schedule B : ESOP OutstandingOpening Balance 5.32 2.53Add: Deferred Employee Compensation 2.16 7.48 2.80 5.32TOTAL 7.48 5.32Schedule C : Reserves & SurplusStatutory ReserveOpening balance 2,118.97 1,271.06Add : Transfer from Profit & Loss A/c for the Year 853.19 2,972.16 847.91 2,118.97Capital Redemption ReserveOpening balance 900.01 900.01Addition during the year 60.00 960.01 - 900.01Securities PremiumOpening balance 39,439.49 37,903.06Addition during the year 1,979.02 41,418.51 1,536.43 39,439.49Capital ReserveOpening balance 7,430.77 8,826.14Addition / (Deduction) during the year (1,516.16) 5,914.61 (1,395.37) 7,430.77General ReserveOpening balance 1,373.56 817.80Addition during the year 1,564.59 2,938.15 555.77 1,373.56Profit & Loss Account 50,295.65 41,897.70TOTAL 104,499.10 93,160.50Schedule D : Secured LoansLoans From ICICI Home Finance – 0.07Loan from Bank – 2,500.00TOTAL – 2,500.07Schedule E : Unsecured LoanCommercial Paper – 8,500.00Less: Discount not written off – – 168.49 8,331.51TOTAL – 8,331.51MOTILAL OSWAL FINANCIAL SERVICES LIMITED 89

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule F : Minority InterestAs at 31-Mar-11(R in Lakhs)As at 31-Mar-10(R in Lakhs)Motilal Oswal Securities LimitedOpening Balance 21.69 16.16Add: Share of Profit / (Loss) during the year 4.68 26.36 5.53 21.69Motilal Oswal Commodities Broker Private LimitedOpening Balance 6.14 2.94Add: Share of Profit / (Loss) during the year 6.22 12.36 3.20 6.14Motilal Oswal Private Equity Advisors Private LimitedOpening Balance 81.18 43.69Add: Share of Profit / (Loss) during the year 34.11 115.28 37.49 81.18Motilal Oswal Investment Advisors Private LimitedOpening Balance 299.79 339.22Add: Share of Profit / (Loss) during the year 199.94 439.33Add / (Less) : Investment / (sale) by Minority (6.25) (6.25)Less : Preaquisition Profits transferred on acquisition of(131.30) (111.76)minority investmentLess: Shares of Minority in dividend paid & tax thereon – 362.18 (360.76) 299.78Motilal Oswal Capital Markets Private LimitedOpening Balance (0.01) (0.00)Add: Share of Profit / (Loss) during the year 0.08 0.06 (0.01) (0.01)Antop Traders Private LimitedOpening Balance 0.03 0.01Add: Share of Profit / (Loss) during the year 0.02 0.05 0.02 0.03Motilal Oswal Asset Management Company LimitedOpening Balance 0.78 –Add: Share of Profit / (Loss) during the year (0.43) (87.89)Add: Investment by Minority 0.50 1.00Less : Preaquisition (Profits) / loss transferred on– 0.85 87.66 0.77acquisition of minority investmentMotilal Oswal Insurance Brokers Private LimitedOpening Balance 0.77 –Add: Share of Profit / (Loss) during the year (0.17) (0.22)Add: Investment by Minority – 1.00Less : Preaquisition (Profits) / loss transferred on– 0.60 (0.00) 0.78acquisition of minority investmentMotilal Oswal Trustee Company LimitedOpening Balance 0.00 –Add: Share of Profit / (Loss) during the year (0.00) (0.00)Add: Investment by Minority – 0.01Add: Share of Opening Reserves of Minority – 0.00 (0.00) 0.01TOTAL 517.75 410.3690CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule G : Fixed Assets(R in Lakhs)PARTICULARS GROSS BLOCK DEPRECIATION NET BLOCKAs on01-Apr-10Addition DeductionAs on31-Mar-11As on01-Apr-10Addition DeductionAs on31-Mar-11As on31-Mar-11As on31-Mar-10Tangible AssetsComputer 3,077.28 318.18 19.68 3,375.78 2,378.68 340.85 17.00 2,702.53 673.25 698.60Furniture & Fittings 1,144.92 11.46 1.71 1,154.67 667.34 90.28 0.73 756.89 397.78 477.58Office Equipments 2,459.77 78.15 15.35 2,522.57 969.50 214.71 5.36 1,178.85 1,343.72 1,490.27Office Premises 4,121.26 102.06 225.41 3,997.91 1,236.95 194.08 98.00 1,333.03 2,664.88 2,884.31Land 2,667.38 – – 2,667.38 – – – – 2,667.38 2,667.38Vehicles 381.53 118.04 19.78 479.79 235.66 40.37 12.77 263.27 216.53 145.88Intangible AssetsBSE/MCX Cards 655.71 – – 655.71 655.16 0.55 – 655.71 – 0.55Customer Rights 683.52 – – 683.52 537.81 136.70 – 674.52 9.00 145.71Software 1,354.70 557.63 40.27 1,872.06 600.15 295.23 13.37 882.01 990.06 754.56Goodwill 90.00 – – 90.00 90.00 0.00 – 90.00 0.00 0.00TOTAL 16,636.08 1,185.52 322.20 17,499.39 7,371.24 1,312.78 147.23 8,536.79 8,962.59 9,264.83Previous Year 13,416.17 3,363.41 143.51 16,636.08 6,006.65 1,418.89 54.29 7,371.25 9,264.83 –Capital - WIP 19,980.74 14,732.43Schedule H : InvestmentsQuantity31-Mar-11As at31-Mar-11R in LakhsQuantity31-Mar-10As at31-Mar-10R in LakhsInvestments - Long Term (At Cost)Investment in Equity SharesQuoted InvestmentsJK Tyre & Industries Limited – – 500,000.00 797.83Unquoted InvestmentsCentral Depository Services India Limited 100.00 0.00 100.00 0.00BSE Limited – – 45,591.00 0.04Other InvestmentsInvestments In India Business Excellence Fund 4,050.00 3,375.00Investments In India Realty Excellence Fund 1,500.00 625.00Reliance Alternative Investments Fund - Private Equity Scheme I 52.50 22.50Aditya Birla Private Equity - Fund I 60.00 30.00Investment properties – 290.54Investment in Emerging Manager Group LP, USA 221.43 –5,883.93 5,140.90Note : Market Value of quoted Investmentas on 31-03-2011 isR Nil (Previous Year 31-03-2010 is R 976.75 lakhs)Schedule I : Sundry Debtors(Unsecured partly, Considered good unless otherwise stated)Debts outstanding for a period exceeding six months 573.22 401.26Less provision for doubtful debts 19.14 554.09 65.14 336.12Other debts 43,067.44 30,254.85TOTAL 43,621.52 30,590.97MOTILAL OSWAL FINANCIAL SERVICES LIMITED 91

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule J : Stock-In-TradeFaceValueQuantity31-Mar-1131-Mar-11R in LakhsQuantity31-Mar-1031-Mar-10R in LakhsEquity Shares(Valued at Cost or Market Value whichever is lower)QuotedAban Offshore Limited 2 2,750.00 16.95 40,000.00 468.36ABB Limited 2 – – 69,557.00 575.18ABG Shipyard Limited 10 5,000.00 18.19 – –ACC Limited 10 11,990.00 128.84 40,668.00 386.45Adani Enterprises Limited 1 38,000.00 253.29 3,200.00 15.03Aditya Birla Nuvo Limited 10 6.00 0.05 14,006.00 126.01Advanta India Limited 10 – – 296.00 1.81Agro Tech Foods Limited 10 1.00 0.00 – –AIA Engineering Limited 2 2.00 0.01 – –Allahabad Bank 10 – – 51,450.00 73.50Alok Industries Limited 10 10,000.00 2.22 – –Alstom Projects India Limited 10 – – 550.00 3.42Ambika Cotton Mills Limited 10 – – 1.00 0.00Ambuja Cements Ltd. 2 – – 531.00 0.50Amtek Auto Ltd. 2 – – 4.00 0.01Andhra Bank 10 20,000.00 30.13 57,500.00 61.40Areva T&D India Ltd. 2 – – 33,750.00 102.94Asian Paints Limited 10 – – 200.00 4.11Aurobindo Pharma Limited 1 180,000.00 352.71 19,604.00 188.08Axis Bank Limited 10 – – 38,167.00 441.16Bajaj Auto Limited 10 17,621.00 257.84 13,999.00 280.28Bajaj Finserv Limited 5 – – 1.00 0.00Bajaj Hindusthan Ltd. 1 1.00 0.00 135,375.00 184.49Bajaj Holdings & Investment Limited 10 – – 1.00 0.01Balrampur Chini Mills Limited 1 28,000.00 19.61 31,200.00 28.78Bank of Baroda 10 77,750.00 750.17 4,899.00 31.29Bank of India 10 2.00 0.01 118,750.00 400.43BEML Limited 10 – – 22,500.00 236.36Benchmark Mutual Fund 10 75,500.00 441.17 72,500.00 380.57BGR Energy Systems Limited 10 15,000.00 71.54 1,600.00 8.53Bharat Electronics Ltd. 10 – – 14,628.00 320.62Bharat Forge Ltd. 2 – – 3.00 0.01Bharat Heavy Electricals Limited 10 1,225.00 25.27 20,119.00 482.00Bharat Petroleum Corpn. Ltd. 10 – – 4,302.00 24.14Bharti Airtel Limited 5 – – 4,642.00 14.55Bhushan Steel Limited 2 2,000.00 8.73 49,590.00 833.92Binani Industries Limited 10 – – 1.00 0.00Biocon Limited 5 – – 22,873.00 65.73Blue Star Limited 2 – – 6.00 0.02Bombay Rayon Fashions Limited 10 – – 3,454.00 7.47Borax Morarji 10 3,211.00 1.40 – –C & C Constructions Limited 10 87.00 0.11 – –Cairn India Limited 10 38,000.00 133.36 167.00 0.49Canara Bank 10 35,500.00 222.32 16,794.00 69.06Career Point Infosystems Limited 10 – 0.25 – –92CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule J : Stock-In-Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in LakhsQuantity31-Mar-1031-Mar-10R in LakhsCentral Bank of India 10 1,900,000.00 2,669.50 – –Century Textiles & Industries Ltd 10 – – 45,791.00 234.94CESC Ltd. 10 – – 6.00 0.02Cipla Ltd. 2 – – 2,664.00 8.94Colgate Palmolive (India) Ltd. 1 – – 2,752.00 19.21Core Projects and Technologies Limited 2 – – 7.00 0.02Corporation Bank 10 – – 5.00 0.02Cummins India Ltd. 2 – – 3.00 0.02D B Realty Limited 10 4,091.00 4.84 – –Deccan Chronicle Holdings Ltd. 2 – – 7.00 0.01Divi’s Laboratories Limited 2 – – 2,480.00 16.82DLF Limited 2 9,875.00 26.52 30,501.00 95.09Dolphin Offshore Enterprises (India) Limited 10 5.00 0.01 – –Dr. Reddy’s Laboratories Ltd. 5 – – 2,000.00 25.50Dredging Corporation of India Limited 10 1.00 0.00 2.00 0.01Dwarikesh Sugar Industries Limited 10 2.00 0.00 – –Easun Reyrolle Ltd 2 – – 600.00 0.57Educomp Solutions Limited 2 53,520.00 224.46 20.00 0.15Electrotherm (India) Limited 10 2.00 0.00 – –Ess Dee Aluminium Limited 10 7.00 0.03 – –Essar Oil Limited 10 – – 125,065.00 173.12ETC Networks Limited 10 – – 129,624.00 284.33Everest Kanto Cylinder Limited 2 – – 12,000.00 14.68Everonn Education Limited 10 – – 500.00 1.85Exide Industries Limited 1 1.00 0.00 – –Financial Technologies (India) Limited 2 – – 16,649.00 265.17GAIL (India) Limited 10 55,024.00 255.31 65,587.00 269.44Ganesh Housing Corporation Limited 10 1.00 0.00 – –GlaxoSmithKline Consumer Healthcare Limited 10 – – 1.00 0.02Glenmark Pharmaceuticals Ltd. 1 – – 2.00 0.01GMR Infrastructure Limited 1 60,000.00 24.30 35,000.00 21.98Grasim Industries Limited 10 2,500.00 61.42 34,754.00 982.91Great Eastern Shipping Co. Ltd. 10 – – 40,800.00 120.03Great Offshore Limited 10 – – 14,379.00 59.89Greycells Education Ltd. 10 – – 14,666.00 7.96GSS America Infotech Limited 10 – – 118.00 0.35GTL Ltd 10 – – 8,250.00 33.78Gujarat Gas Co. Ltd 2 8.00 0.03 783.00 2.23Gujarat Sidhee Cements Ltd 10 1.00 0.00 1.00 0.00Gujarat State Fertilizers & Chemicals Ltd. 10 – – 1.00 0.00GVK Power & Infrastructure Limited 1 – – 150.00 0.07HCL Technologies Limited 2 9,674.00 46.24 145.00 0.44HDFC Bank Limited 10 6,878.00 161.35 29,428.00 568.46HEG Ltd. 10 – – 696.00 2.36Hero Honda Motors Limited 2 500.00 7.95 41,615.00 806.23Himadri Chemicals and Industries Limited 1 2.00 0.00 – –Hindalco Industries Limited 1 266,000.00 556.34 21,216.00 30.57Hinduja Ventures Limited 10 – – 33.00 0.10Hindustan Construction Company Limited 1 320,001.00 116.48 25,201.00 33.48MOTILAL OSWAL FINANCIAL SERVICES LIMITED 93

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule J : Stock-In-Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in LakhsQuantity31-Mar-1031-Mar-10R in LakhsHindustan Petroleum Corporation Limited 10 500.00 1.78 14,299.00 45.69Hindustan Unilever Limited 1 – – 171.00 0.49Hindustan Zinc Ltd. 10 – – 8,676.00 105.02Hitachi Home and Life Solutions (India) Limited 10 1.00 0.00 – –Housing Development and Infrastructure Limited 10 105,000.00 185.64 116,874.00 352.15Housing Development Finance Corporation Limited 2 34,500.00 241.91 45,985.00 1,243.20H.P. Cotton 10 150.00 0.00 150.00 0.00Hyderabad Industries Limited 10 2.00 0.01 – –ICICI Bank Limited 10 47,250.00 527.40 83,018.00 789.09ICSA (India) Limited 2 – – 1,200.00 1.55IDBI Bank Limited 10 52,000.00 74.07 21,600.00 25.77Idea Cellular Ltd. 10 – – 773.00 0.49IFCI Limited 10 80,000.00 42.08 – –India Cements Ltd. 10 – – 2,900.00 3.82India Infoline Limited 2 – – 10,000.00 11.44Indiabulls Real Estate Limited 2 – – 1,300.00 1.99Indian Oil Corporation Ltd 10 – – 2,395.00 7.12Indian Overseas Bank 10 – – 59,000.00 54.25Indo Tech Transformers Limited 10 – – 12.00 0.03Indraprastha Gas Limited 10 1.00 0.00 – –IndusInd Bank Limited 10 1.00 0.00 1.00 0.00Infosys Technologies Ltd. 5 – – 33,223.00 871.74Infrastructure Development Finance Company Limited 10 16,000.00 24.74 22,123.00 34.55IOL Netcom Limited 5 5.00 0.00 23,023.00 4.55Ispat Industries Limited 10 160,000.00 35.84 62,250.00 12.08ITC Ltd. 1 – – 4,692.00 12.32IVRCL Infrastructures & Projects Ltd. 2 2.00 0.00 2.00 0.00Jain Irrigation Systems Limited 2 – – 3,000.00 28.74Jaipan Industries Ltd. 10 – – 13,433.00 3.45Jaiprakash Associates Limited 2 52,000.00 48.26 44,164.00 59.83Jayshree Tea & Industries Limited 5 1.00 0.00 – –Jet Airways (India) Limited 10 5,505.00 24.61 5.00 0.02Jindal Steel & Power Limited 1 10,500.00 73.22 26,270.00 178.79JSW Steel Limited 10 113,250.00 1,037.71 110,826.00 1,363.61Jubilant Foodworks Limited 10 1.00 0.01 156.00 0.49Jupiter Bioscience Limited 10 100.00 0.02 369.00 0.31K Sera Sera Productions Ltd. 10 299.00 0.04 368,250.00 44.64Kalyani Steels Limited 5 2.00 0.01 – –Khaitan Electricals Limited 10 3.00 0.00 – –Kingfisher Airlines Limited 10 – – 12,764.00 6.07Kiri Dyes and Chemicals Limited 10 – – 471.00 3.32Kirloskar Brothers Limited 2 3.00 0.00 – –Kotak Mahindra Bank Limited 10 – – 13,000.00 420.22Koutons Retail India Limited 10 – – 1.00 0.00KPIT Cummins Infosystems Limited 2 – – 306.00 0.36Lanco Infratech Limited 1 220,000.00 87.01 – –Larsen & Toubro Limited 2 6,625.00 109.44 52,427.00 850.43Laxmi Vilash Bank 10 77.00 0.03 77.00 –LIC Housing Finance Ltd. 10 – – 5,525.00 48.1594CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule J : Stock-In-Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in LakhsQuantity31-Mar-1031-Mar-10R in LakhsLupin Limited 2 – – 8,406.00 136.07Magma Fincorp Limited 2 – – 1.00 0.00Mahanagar Telephone Nigam Limited 10 28,000.00 12.70 28,800.00 21.08Mahindra & Mahindra Limited 5 24,500.00 171.59 26,886.00 144.39Mahindra Holidays & Resorts India Limited 10 – – 14.00 0.08Man Infraconstruction Limited 10 1.00 0.00 505.00 1.84Maruti Suzuki India Limited 5 28,011.00 353.54 61,231.00 874.83Mastek Ltd. 5 – – 1,908.00 6.39Mcdowell Holdings Ltd. 10 – – 44,000.00 581.42Moser–Baer (I) Ltd. 10 – – 2,477.00 1.88MphasiS Limited 10 5,000.00 20.76 21,599.00 134.01Mundra Port and Special Economic Zone Limited 2 102,000.00 139.38 35,101.00 274.95Nagarjuna Fertilizer & Chemicals Ltd. 10 – – 5,250.00 1.61Nalwa Sons Investments Limited 10 2.00 0.02 – –Neyveli Lignite Corporation Limited 10 4,002.00 4.16 – –NIIT Limited 2 1.00 0.00 – –Nitin Fire Protection Industries Limited 2 – – 1.00 0.00Northgate Technologies Limited 10 – – 13,664.00 2.62NTPC Limited 10 – – 190,341.00 387.24Oil & Natural Gas Corporation Limited 5 54,000.00 157.30 34,239.00 375.56OnMobile Global Limited 10 – – 1,627.00 6.35Opto Circuits (India) Limited 10 – – 8,160.00 17.84Oracle Financial Services Software Limited 5 – – 2.00 0.05Orchid Chemicals & Pharmaceuticals Limited 10 1.00 0.00 21,000.00 32.32Orient Bank of Commerece 10 – – 46,800.00 143.87Pantaloon Retail (India) Limited 2 155,000.00 400.99 33,153.00 130.71Parekh Aluminex Limited 10 1.00 0.00 – –Parsvnath Developers Limited 5 – – 374.00 0.42Patel Engineering Limited 1 4.00 0.01 3,002.00 13.69Patni Computer Systems Limited 2 – – 28,599.00 154.12Petronet LNG Limited 10 4,000.00 4.87 – –Pipavav Shipyard Limited 10 – – 1.00 0.00Piramal Healthcare Limited 2 74,500.00 310.52 – –Polyplex Corporation Limited 10 5.00 0.01 – –Power Finance Corporation Limited 10 – – 1.00 0.00Power Grid Corporation of India Limited 10 312,000.00 317.93 28,826.00 31.30Praj Industries Ltd. 2 – – 2,450.00 2.11Pricol Limited 1 – – 3.00 0.00Punj Lloyd Limited 2 – – 34,500.00 61.20Punjab National Bank 10 8,000.00 97.02 62,454.00 616.87Rain Commodities Limited 10 1.00 0.00 – –Rallis India Limited 10 6.00 0.08 – –Ranbaxy Laboratories Limited 5 4,000.00 17.82 16,920.00 79.24Rei Agro Limited 1 14.00 0.00 – –Reliance Capital Limited 10 21,999.00 128.29 66,317.00 508.03Reliance Communications Limited 5 – – 129,682.00 219.57Reliance Industries Limited 10 29,250.00 306.86 111,342.00 1,199.70Reliance Infrastructure Limited 10 – – 83,388.00 835.95Reliance MediaWorks Limited 10 – – 10,014.00 3.95MOTILAL OSWAL FINANCIAL SERVICES LIMITED 95

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule J : Stock-In-Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in LakhsQuantity31-Mar-1031-Mar-10R in LakhsReliance Power Limited 10 6,000.00 7.82 26,317.00 39.37Religare Enterprises Limited 10 – – 3.00 0.01Renaissance Jewellery Limited 10 – – 313.00 0.25Reliance Media 5 – – 4,500.00 4.08Rolta India Ltd. 10 – – 1,800.00 3.22Ruchi Soya Industries Limited 2 25.00 0.03 – –Rural Electrification Corporation Limited 10 – – 71,997.00 159.49Selan Exploration Technology Limited 10 – – 800.00 3.43Sesa Goa Ltd. 1 – – 3,007.00 14.15Shekhawati Poly–Yarn Limited 10 5.00 0.00 – –Shipping Corporation of India Limited 10 82,001.00 88.11 – –Shiv–Vani Oil & Gas Exploration Services Limited 10 1.00 0.00 876.00 3.81Shree Ashtavinayak Cine Vision Limited 1 – – 115.00 0.01Shree Renuka Sugars Limited 1 188,000.00 130.85 500,000.00 358.44Shri Lakshmi Cotsyn Limited 10 – – 1.00 0.00Siemens Limited 2 2,000.00 17.62 45,958.00 335.24Simplex Infrastructures Limited 2 6.00 0.02 – –Spice Mobiles Limited 1 1.00 0.00 1.00 0.00Spice 1 1.00 0.00 – –State Bank of India 10 58,255.00 1,610.93 80,148.00 1,651.78Steel Authority of India Ltd. 10 – – 11,795.00 25.00Sterling Biotech Limited 1 6,000.00 5.69 10,000.00 10.56Sterlite Industries (India) Limited 1 21,633.00 37.58 74,954.00 628.40Sterlite Technologies Limited 2 – – 1.00 0.14Subex Limited 10 26,000.00 14.00 6,004.00 3.70Sun Pharmaceuticals Industries Limited 1 53,125.00 235.08 9,448.00 158.42Sun TV Network Limited 5 7,612.00 34.20 – –Sunteck Realty Limited 2 – – 6.00 0.03Supreme Industries Ltd. 10 – – 1.00 0.00Suzlon Energy Limited 2 376,000.00 167.70 63,543.00 45.75Swaraj Mazda Ltd. 10 – – 313.00 0.77Syndicate Bank 10 74,000.00 90.80 – –Tata Chemicals Ltd. 10 – – 8,100.00 26.58Tata Communications Limited 10 – – 6,825.00 19.17Tata Consultancy Services Limited 1 5,250.00 62.15 39,551.00 307.96Tata Elxsi Limited 10 – – 201.00 0.65Tata Global Bev 1 1.00 0.00 – –Tata Investment Corporation Ltd. 10 – – 197.00 0.98Tata Motors Limited 10 322,618.00 2,245.10 14,872.00 81.50Tata Power Company Limited 10 8,250.00 110.15 30,283.00 416.15Tata Sponge Iron Limited 10 12.00 0.04 – –Tata Steel Limited 10 12,000.00 74.67 84.00 0.48Tata Teleservices (Maharashtra) Limited 10 – – 104,500.00 25.28Tatamotors–Dvr–A-Ordy 10 – – 75,708.00 345.11TCM Ltd. 10 5,000.00 0.14 5,000.00 –Tech Mahindra Limited 10 – – 43,232.00 375.06Television Eighteen India Limited 5 88,000.00 68.29 83,975.00 65.85Texmo Pipes and Products Limited 10 – – 125.00 0.12The Andhra Pradesh Paper Mills Limited 10 3.00 0.01 – –96CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011Schedule J : Stock-In-Trade (contd..)FaceValueQuantity31-Mar-1131-Mar-11R in LakhsQuantity31-Mar-1031-Mar-10R in LakhsThe Federal Bank Limited 10 5,050.00 21.14 5,107.00 13.50The Great Eastern Shipping Company Limited 10 76,000.00 199.99 39,601.00 114.56The Phoenix Mills Limited 2 2.00 0.00 2.00 0.00Thermax Ltd. 2 – – 1.00 0.01Tilaknagar Industries Ltd. 10 – – 2,009.00 2.60TIPS Industries Limited 10 – – 1.00 0.00Titagarh Wagons Limited 10 2.00 0.01 – –Titan Industries Limited 10 2,875.00 109.58 2,472.00 45.50TTK Healthcare Limited 10 1.00 0.00 – –Tulip Telecom Limited 2 – – 13,500.00 113.83TVS Motor Company Limited 1 112,000.00 67.03 – –UCO Bank 10 52,000.00 55.64 – –UltraTech Cement Limited 10 – – 1.00 0.01Union Bank of India 10 72,000.00 250.02 7,200.00 21.05Uniphos Enterprises Ltd. 2 – – 4,200.00 6.27Unitech Ltd. 2 – – 468,439.00 346.39United Phosphorous Limited 2 – – 10,349.00 15.50United Spirits Limited 10 65,000.00 666.12 23,750.00 328.51Valecha Engineering Limited 10 – – 836.00 1.41Varun Industries Limited 10 1.00 0.00 – –Videocon Industries Limited 10 1.00 0.00 11,099.00 25.70Vijaya Bank 10 36,000.00 28.60 – –Voltas Ltd. 1 – – 5,380.00 9.64West Coast Paper Mills Limited 2 13.00 0.01 – –Whirlpool of India Limited 10 – – 1,000.00 1.64Wipro Limited 2 43,430.00 208.55 – –Wipro Ltd. 2 – – 10,279.00 70.12Yes Bank Limited 10 8,124.00 25.15 30,800.00 78.86Zee Entertainment Enterprises Limited 1 19,380.00 23.95 30,802.00 82.91Zydus Wellness Limited 10 1.00 0.01 – –Zylog Systems Limited – – 300.00 1.28UnquotedXLO United Limited 10 5,300.00 0.27 5,300.00 0.27Shyam Vinyl 10 100.00 0.01 100.00 0.01Total Equity Shares 18,503.69 29,875.03Exchange Traded FundsMotilal Oswal Mutual Fund - Motilal Oswal MOSt Shares607,768.00 44.25 – –M100 ETFMotilal Oswal Mutual Fund - Motilal Oswal MOSt Shares78,789.00 61.90 – –M50 ETFMotilal Oswal Mutual Fund - Motilal Oswal MOSt Shares101,364.00 105.20 – –NASDAQ 100 ETFKotak Mahindra Mutual Fund - Permitted 5 – – 98,973.00 519.05Kotak Mahindra Mutual Fund - Kotak Nifty ETF 10 – – 13,000.00 64.27Reliance Mutual Fund - Reliance Banking Exchange 5 23,000.00 34.67 10,014.00 90.14Traded Fund(Valued at Cost or Market Value whichever is lower)Subtotal for Exchange Traded Funds 246.01 673.46TOTAL 18,749.70 30,548.50MOTILAL OSWAL FINANCIAL SERVICES LIMITED 97

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011As at 31-Mar-11(R in Lakhs)As at 31-Mar-10(R in Lakhs)Schedule K : Cash & Bank BalancesCash:Cash balance on Hand 18.62 18.56Bank:Scheduled Banks- In Current Accounts 8,078.63 12,464.49In Fixed Deposits 18,551.61 30,850.48In Unpaid Dividend Account 2.63 1.31TOTAL 26,651.48 43,334.84Schedule L : Loans & Advances(Unsecured considered good unless otherwise stated)Loans, Advances & Deposits Recoverable in Cash or InKind or for Value to be receivedStandard AssetsLoansUnsecured (includes interest accrued on loans) 2,993.36 1,031.69Secured (includes interest accrued on loans) 26,575.08 29,568.43 15,074.73 16,106.42Sub-Standard AssetsNon Performing Assests (Debts outstanding for a period– 139.20exceeding Six months)Less: Provision for bad & doubtful debts – – – 139.20Advances Recoverable in Cash or In Kind or for Value to be1,342.91 866.41receivedLoan to staff 73.83 106.24Balance in Arbitrage Account 2,353.40 6,601.35Other Deposits 1,163.81 1,179.00NSE Membership Deposit 50.00 50.00Mark to Market Margin - Equity Index / Stock Futures 0.08 223.76Less : Provision for loss (0.08) – (209.05) 14.71Equity Index / Stock Option Premium 6,330.34 2,806.37Less : Provision for loss (117.12) 6,213.22 (12.53) 2,793.84Advance Tax & Tax Deducted at Source 20,842.10 21,517.20TOTAL 61,607.70 49,374.37Schedule M : Other Current AssetsAccrued Interest on Fixed Deposits 390.77 535.68Stock of Stamps 20.17 7.45Sign on bonus pending amortisation – 6.03TOTAL 410.95 549.1698CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Consolidated Balance Sheet as at 31st March, 2011As at 31-Mar-11(R in Lakhs)As at 31-Mar-10(R in Lakhs)Schedule N : Current LiabilitiesSundry Creditors (Including Trade Payables) :Due to Micro, Small & Medium Enterprises 9.05 4.58Due to Others 40,778.76 38,769.01Book borrowing from Banks 3,247.15 839.61Other Liabilities 6,840.07 9,315.48Margin Money Deposits 5,183.25 4,825.06Sign On Insurance Commission 0.00 69.03Unpaid Dividend 2.63 1.31Mark to Market Margin - Equity Index / Stock Futures 94.17 (3.97)Add : Provision for loss (78.24) 15.93 140.51 136.54TOTAL 56,076.85 53,960.62Schedule O : ProvisionsProvision for Taxation (Including Wealth Tax) 19,793.83 20,982.92Provisions against Standard / Substandard Assets 73.92 41.76Provision for Fringe Benefit Tax 117.16 316.25Provision for Gratuity 493.75 345.49Proposed Dividend 2,153.63 2,027.44Provision for Proposed Dividend Distribution Tax 675.91 336.73TOTAL 23,308.19 24,050.59MOTILAL OSWAL FINANCIAL SERVICES LIMITED 99

SCHEDULESSchedules to Consolidated Profit & Loss Account for the year ended 31st March, 2011For the yearended 31-Mar-11(R in Lakhs)For the yearended 31-Mar-10(R in Lakhs)Schedule P : Income from OperationsBrokerage and related activities 43,336.84 45,512.99Investment Banking fees 3,981.30 6,494.48Fund based income 7,378.98 6,487.90Asset Management & Advisory Fees 4,272.60 4,005.68TOTAL 58,969.71 62,501.05Schedule Q : Other IncomeDividend Income - Long Term Investments 19.49 45.04Dividend Income - Mutual Fund 439.89 860.78Profit/ (Loss) on sale of Investments 155.59 1,122.65Profit/(Loss) on sale of fixed assets 330.28 (28.91)Miscellaneous Income 122.17 31.87TOTAL 1,067.42 2,031.43GROSS REVENUE 60,037.14 64,532.49Schedule R : Operating ExpensesBrokerage sharing with Intermediaries 13,895.51 15,604.99Depository Charges 266.03 309.71Other Operating expenses 389.92 381.77TOTAL 14,551.46 16,296.47Schedule S : Personnel ExpensesSalary, Bonus and Allowances 11,775.52 11,049.76Directors’ Remuneration 1,428.31 1,760.25Directors’ Sitting Fees 7.90 21.30Data Processing Charges 478.11 524.51Gratuity 188.59 94.97Contribution to Provident & Other Funds 157.78 103.54Staff Welfare Expenses 182.68 111.42TOTAL 14,218.88 13,665.75100CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedules to Consolidated Profit & Loss Account for the year ended 31st March, 2011For the yearended 31-Mar-11(R in Lakhs)For the yearended 31-Mar-10(R in Lakhs)Schedule T : Administrative & Other ExpensesRent, Rates & Taxes 920.84 811.30Insurance 103.85 80.14Repairs - Building - 0.21Repairs & Maintenances - Others 379.95 273.94Legal & Professional Charges 642.58 573.54Remuneration to Auditors 18.79 18.37Membership & Subscription 37.46 32.16Marketing & Brand Promotion Expenses 2,239.08 1,519.31Printing & Stationery 677.17 382.57Electricity Expenses 365.39 425.16Communication Expenses 1,041.25 746.54Travelling & Conveyance Expenses 869.25 782.23Donations 16.56 41.37Bad Debts Written Off / Trading Loss (Net of Provision) 117.22 400.26Provision for Standard Assets / Bad and doubtful debts 93.06 65.14Courier Expenses 247.58 189.02Office Expenses 174.20 134.87Entertainment Expenses 228.33 195.36Miscellaneous Expenses 136.38 199.72Business Support Charges 2.03 0.62TOTAL 8,310.97 6,871.83Schedule U : Interest & Finance ChargesBank Guarantee Commission and Other charges 348.85 479.59Interest on Non Convertible Debentures – 98.44Interest on Bank Overdrafts 34.53 137.00Discount on Commercial Paper 115.33 186.01Interest Others 70.23 61.33TOTAL 568.94 962.37MOTILAL OSWAL FINANCIAL SERVICES LIMITED 101

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 20111. Significant Accounting Policies:1.1 Basis of Preparation of Financial Statements:The accompanying consolidated financial statements are prepared under the historical cost convention, on the accrual basis ofaccounting and comply in all material respects with the accounting standards issued by the Institute of Chartered Accountantsof India / accounting standards notified under sub-section (3C) of section 211 of the Companies Act, 1956 (to the extentapplicable) and in accordance with the generally accepted accounting principles and the provisions of the Companies Act,1956.1.2 Use of Estimates:The preparation of the consolidated financial statements in conformity with the generally accepted accounting principlesrequires the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenuesand expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanyingconsolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as ofthe date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing theaccompanying consolidated financial statements. Any differences of actual results to such estimates are recognized in theperiod in which the results are known / materialized.1.3 Fixed Assets & Depreciation:Fixed Assets are stated at cost less accumulated depreciation thereon. The cost of fixed assets comprises purchase priceand any attributable cost of bringing the asset to its working condition for its intended use. The Company provides pro-ratadepreciation from the date on which asset is acquired / put to use. In respect of assets sold, pro-rata depreciation is providedup to the date on which the asset is sold. On all assets, except as mentioned below, depreciation has been provided using theWritten down Value method at the rates specified in Schedule XIV to the Companies Act, 1956.a) Assets costing R 5,000/- or less are fully depreciated in the year of purchase.b) Improvements to leasehold premises are depreciated over the initial period of lease.c) Expenditure which are attributable to Construction of a project are included as part of the cost of the construction projectduring construction period and included under capital work-in-progress which is allocated to the respective fixed assets onthe completion of the construction period.1.4 Borrowing Cost:Interest and other costs in connection with the borrowing of the funds to the extent related / attributed to the acquisition/construction of qualifying fixed assets are capitalised up to the date when such assets are ready for its intended use and otherborrowing costs are charged to Profit & Loss Account.1.5 Intangible Assets and Amortization:a) Expenses incurred on Computer Software having enduring benefits are capitalized and amortized on Straight Line Method(SLM) basis over a period of five years.b) Customer Rights acquired by the Company are considered as Intangible asset and amortized over a period of five years onStraight Line Method (SLM) basis from the date of acquisition.c) Goodwill acquired by the Company is amortized over a period of three years on Straight Line Method (SLM) basis from thedate of acquisition.d) Payment made for the membership of the Multi- Commodity Exchange has been treated as intangible asset and has beenamortised over a period of five years.1.6 Investments:Investments are classified into long-term investments and current investments. Investments that are intended to be held forone year or more are classified as long-term investments and investments that are intended to be held for less than one yearare classified as current investments.Long term investments are valued at cost and the cost is determined on the basis of the average carrying amount of the totalholding of the investment. Provision for diminution in value of long term investments is made if in the opinion of managementsuch a decline is other than temporary.Current investments are valued at cost or market / fair value, whichever is lower.1.7 Stock In Trade:a) Shares are valued at cost or market value, whichever is lower. The comparison of Cost and Market value is done separatelyfor each category of Shares. Cost is considered on Weighted average basis.102CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)b) Units of Mutual Funds are valued at cost or market value, whichever is lower. Net Asset Value of units declared by mutualfunds is considered as market value for non-exchange traded Mutual Funds.1.8 Revenue Recognition:a) Brokerage income is recognized on trade date basis and is exclusive of service tax and Securities Transaction Tax (STT)wherever applicable.b) Insurance agency income on first year premium of insurance policies is recognised, when an insurance policy sold by theCompany is accepted by the principal insurance company. Renewal commission on policies is accounted for on receiptof renewal premium by the principle insurance company. Sign-on Bonus received is accounted on pro-rata basis in theproportion of business generated to the Minimum Business Guarantee as per the contracted terms.c) Research, Advisory and Transactional processing fee income is accounted for on an accrual basis in accordance with theterms & contracts entered into between the Company and the counter party.d) Portfolio management fees are billed as per the terms of the respective schemes / agreement entered with the clients:i. In case of management fees (including custodian charges wherever applicable), as a percentage of the asset undermanagement on quarterly / monthly basis.ii. In case of performance based fees, as a percentage of returns on an annual basis.e) Management Fees other than Portfolio management fees is accounted on accrual basis net of service tax.f) Interest Income is recognized on the time proportionate basis starting from the date of disbursement of loan. In case ofNon Performing Assets, interest income is recognised on receipt basis, as per NBFC Prudential norms.g) Dividend income is recognized when the right to receive payment is established.h) Income from arbitrage comprises profit / loss on sale of securities held as stock-in-trade and profit / loss on equityderivative instruments.i. Profit / loss on sale of securities is determined based on the weighted average cost of the securities sold.ii. Profit / loss on equity derivative transactions is accounted for as explained below :-1. Initial and additional margin paid over and above initial margin, for entering into contracts for Equity Index/StockFutures and or equity Index / stock options which are released on final settlement / squaring-up of underlyingcontracts are disclosed under Current Assets, Loans and advances. “Mark-to-market margin- Equity Index /Stock Futures” representing the amounts paid in respect of mark to market margin is disclosed under Loans andAdvances and amount received is shown under Current Liabilities.2. “Equity Index / Stock Option Premium Account” represents premium paid or received for buying or selling theoptions, respectively.3. On final settlement or squaring-up of contracts for equity index / stock futures, the realized profit or loss afteradjusting the unrealized loss already accounted, if any, is recognized in the Profit and Loss Account . On settlementor squaring-up of equity index / stock options before expiry, the premium prevailing in “Equity Index / Stock OptionPremium Account” on that date is recognized in the Profit and Loss Account. When more than one contract inrespect of the relevant series of equity index / stock futures or equity index / stock options contract to which thesquared-up contract pertains is outstanding at the time of the squaring-up of the contract, the contract price ofthe contract so squared-up is determined using the weighted average cost method for calculating the profit / losson squaring-up.4. As at the balance sheet date, the mark to market / Unrealised Profit/(Loss) on all outstanding hedged transactionscomprising of Securities and Equity Derivatives positions is determined on a Portfolio basis with net unrealizedlosses being recognized in the Profit and Loss Account. Unrealized gains (on overall portfolio basis) are notrecognized in the Profit and Loss Account on grounds of prudence as enunciated in Accounting Standard – 1,Disclosure of Accounting Policies. In respect of other transactions, the unrealized losses on equity derivativesdetermined on scrip-basis are recognized in Profit and Loss Account and unrealized gains are ignored; andin case of securities (shares, etc.) the net unrealized losses are recognized in Profit & Loss Account and netunrealized gains are ignored.i) In respect of other heads of income, income from depository operations etc., the Company accounts the same on accrualbasis.1.9 Commercial Paper:The liability is recognised at face value at the time of issue of commercial paper. The discount on issue of commercial paper isamortized over the tenure of the commercial paper.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 103

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)1.10 Foreign Currency Transactions:Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchangedifferences, if any arising out of transactions settled during the year are recognised in the Profit and Loss Account. Monetaryassets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rateon that date. The exchange differences, if any, are recognised in the Profit and Loss Account and related assets and liabilitiesare accordingly restated in the Balance Sheet.1.11 Employee Benefits:Provident Fund:Contribution payable to the recognized provident fund, which is a defined contribution scheme, is charged to the Profit and LossAccount in the period in which they occur.Gratuity:Gratuity is post employment benefit and is in the nature of Defined Benefit Plan. The Liability recognized in the Balance Sheetin respect of gratuity is the present value of defined benefit obligation at the balance sheet date, together with the adjustmentsfor unrecognized actuarial gain or losses and the past service costs. The defined benefit obligation is calculated at or near thebalance sheet date by an independent actuary using the projected unit credit method.Compensated Absences:As per the policy of the company, an employee can carry forward maximum 50% of the leave annually. No leave is allowed to beencashed. An obligation arises as employees render service that increases their entitlement to future compensated absences.Provision is made for expected cost of accumulating compensated absences as a result of unused leave entitlement which hasaccumulated as at the balance sheet date.Ex-gratia (Bonus):The Company recognizes the costs of bonus payments when it has a present obligation to make such payments as a result ofpast events and the reliable estimate of the obligation can be made.1.12 Taxation:Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-taxlaw), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxableincome for the period) and fringe benefit tax.Current Tax:Provision for current tax is made on the basis of estimated taxable income for the accounting year in accordance with theIncome Tax Act, 1961.Deferred Tax:The deferred tax charge or credit and the corresponding deferred tax liabilities and assets are recognized using the tax ratesthat have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to theextent there is reasonable certainty that the asset can be realised in future; however, where there is unabsorbed depreciationor carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisationof the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect theamount that is reasonable / virtually certain (as the case may be) to be realized.1.13 Sign on Bonus:Sign on Bonus paid to the employees is accounted under the Loans & Advances in the Balance sheet and debited to Profit &Loss over the period of minimum employment as agreed.1.14 Preliminary Expenses:Preliminary expenses are charged to the Profit and Loss Account in the year in which they are incurred.1.15 Operating Leases:Lease rentals in respect of operating lease are charged to the Profit and Loss Account as per the terms of the lease arrangementon a straight line basis.1.16 Provisions and Contingencies:The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflowof resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is madewhen there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.104CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote,no provision or disclosure is made.Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probablethat the outflow of resources would be required to settle the obligation, the provision is reversed.Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and ifit is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which thechange occurs.1.17 Impairment of Assets:The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any suchindication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset orthe recoverable amount of the cash generating unit which the asset belongs to, is less than its carrying amount, the carryingamount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Profitand Loss Account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longerexists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum ofdepreciable historical cost.1.18 Prudential Norms of Reserve Bank of India:The Company follows the NBFC Prudential Norms (Reserve Bank) Directions, 1998 issued by the Reserve Bank of India Act,1934 in respect of income recognition and provisioning for non-performing assets.2. Notes to Accounts:2.1 Principles and assumptions used for consolidated financial statements and pro-forma adjustments:a) The consolidated financial statements have been prepared substantially applying the principles laid in the AccountingStandard (AS) 21 Consolidated Financial Statements issued by the Institute of Chartered Accountants of India asconsidered appropriate for the purposes of these Consolidated Balance Sheet, and Profit and Loss Account, togetherreferred to in as ‘Consolidated Financial Statements’.b) Following are the companies whose accounts have been considered for the consolidated financial statements.Motilal Oswal Financial Services Limited (‘the Company’ or ‘the holding company’) shareholding in the following companies(‘resultant subsidiaries – All are in India) as on March 31, 2011 and March 31, 2010 is as under:Name of the SubsidiaryCompaniesNo. ofShares31st March, 2011 31st March, 2010% ofHoldingDate of BecomingSubsidiaryNo. ofShares% ofHoldingDate of BecomingSubsidiaryMotilal Oswal Securities Limited 1,318,218 99.95 18th January, 06 1,318,218 99.95 18th January, 06Motilal Oswal Commodities Broker 400,000 97.55 6th April, 06 400,000 97.55 6th April, 06Pvt. LimitedMotilal Oswal Investment Advisors 875,000 87.50 16th June, 06 812,500 81.25 16th June, 06Pvt. LimitedMotilal Oswal Private Equity50,000 85 18th May, 06 50,000 85 18th May, 06Advisors Private LimitedMotilal Oswal Capital Markets 1,250,000 99.95 18th December, 07 1,25,0000 99.95 18th December, 07Private LimitedAntop Traders Pvt. Limited 3 99.95 29th September, 08 3 99.95 29th September, 08Motilal Oswal Insurance Brokers 990,000 99 9th April, 09 1,000,000 99 9th April, 09Pvt. LimitedMotilal Oswal Asset ManagementCompany Limited30,000,000 99.95 26th November, 09 20,000,000 99.95 26th November, 09Motilal Oswal Trustee Company Limited 100,000 99.95 20th January, 2010 100,000 99.95 20th January, 20102.2 Principles used in preparing Consolidated Financial Statements:a) In preparing consolidated financial statements, the financial statements of the parent and its subsidiaries is combined ona line by line basis by adding together like items of assets, liabilities, income and expenses.b) The cost to the parent of its investment in each subsidiary and the parent’s portion of equity of each subsidiary, at the dateon which investment in each subsidiary is made, is eliminated.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 105

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)c) Intra-group transactions are eliminated in preparation of consolidated financial statements.d) The excess of the cost to the parent of its investment in a subsidiary over the parent’s portion of equity of the subsidiary, atthe date on which investment in the subsidiary is made, is treated as goodwill & recognised as an asset in the consolidatedfinancial statements.e) When the cost to the parent of its investment in a subsidiary is less than the parent’s portion of equity of the subsidiary, atthe date on which investment in the subsidiary is made, the difference is treated as a capital reserve in the consolidatedfinancial statements.f) Minority interests in the net income of consolidated subsidiaries for the reporting period is identified and adjusted againstthe income of the group in order to arrive at the net income attributable to the owners of the parent; and Minority interestsin the net assets of consolidated subsidiaries is identified and presented in the Consolidated Balance Sheet separatelyfrom liabilities and the equity of the parent’s shareholders. Minority interests in the net assets consist of:(i) the amount of equity attributable to minorities at the date on which investment in a subsidiary is made; and(ii) the minorities’ share of movements in equity since the date the parent-subsidiary relationship came in existence.g) Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events insimilar circumstances.2.3 Contingent liabilities not provided for:a) The Company has provided bank guarantees aggregating to R 28,210.00 lakhs (Previous Year : R 37,780 lakhs) as on 31March, 2011 for the following purposes to:i. The National Stock Exchange of India Limited – R 24,900.00 lakhs (Previous Year : R 31,300 lakhs) for meetingmargin requirements.ii. Bombay Stock Exchange Limited - R 3,060.00 lakhs (Previous Year: R 5,560 lakhs) for meeting margin requirements.iii. The Multi Commodity Exchange of India Limited – R 200.00 lakhs (Previous Year : R 550 lakhs) for meeting marginrequirements.iv. National Commodity & Derivatives Exchange Limited – R 50.00 lakhs (Previous Year: R 370 lakhs) for meeting marginrequirements.The Company has pledged fixed deposits with banks aggregating of R 11,815.00 lakhs (Previous Year R 18,277.90,)b) The Company has given corporate guarantees of R 250.00 lakhs (Previous Year: R 3,920.06 lakhs) to various banks.c) Demand in respect of Income Tax matters for which appeal is pending R 1,195.45 lakhs (Previous Year R 1,014.38 lakhs)This is disputed by the Company and hence not provided for. The Company has paid demand of R 585.52 lakhs (PreviousYear R 611.06 lakhs).d) Claims against the Company, to the extent quantifiable, in respect of legal matters filed against the Company -Pending against forum No. of Cases R in lakhsCivil / Consumer Court Cases 90 709.38Arbitration Cases 5 17.61TOTAL 95 726.99Future cash outflows in respect of (d) above are determinable only on receipt of judgments/decisions pending with variousforums / authorities.2.4 Employees’ Stock Options Scheme (ESOS) :During the year the Company has granted 3,494,000 Employee Stock Options to various employees of the Company and itssubsidiary Companies.The Company has adopted intrinsic value method of accounting Employee Compensation Cost in respect of ESOS. The intrinsicvalue of shares is excess of market price of the shares under ESOS over the exercise price. Employee Compensation Costis accounted for by amortizing the intrinsic value on the straight line basis over the vesting period. The total amount to beamortized as at March 31, 2011 over the balance vesting period is R 2.55 lakhs (Previous Year - R 4.93 lakhs).2.5 In the opinion of the Board of Directors, all current assets, loans and advances would be realizable at least of an amount equalto the amount at which they are stated in the Balance sheet.2.6 During the current year, Company has made a provision R 73.92 lakhs in thousands being 0.25% of its standard assets as perthe Notification No. DNBS.222/CGM(US)-2011 dated 17th January, 2011 issued by RBI.106CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)2.7 A dividend of R 2,144.63 lakhs proposed in the financial statement of the subsidiary company Motilal Oswal Securities Limited& Motilal Oswal Investment Advisors Private Limited, though not recognized as income in the financial statement of the parentcompany (MOFSL) as the date of relevant AGM, of such subsidiary companies falls after the date of adoption of accounts, bythe board of the parent company, such proposed dividend has been eliminated in the consolidated financial statement.2.8 Balance of Sundry debtors and Sundry creditors are subject to confirmation.2.9 Disclosures, relating to amounts unpaid as at the year end together with interest paid / payable as required under the Micro,Small and Medium Enterprise Development Act, 2006 have been given to the extent Group has received intimation from“Suppliers” regarding their status under the said Act.2.10 Managerial Remuneration:Managerial Remuneration paid to Chairman & Managing Director, Joint Managing Director and Whole-Time Director.(R in lakhs)Particulars 2010-11 2009-10Salary (i) 421.90 341.23Commission (ii) 1,033.40 1,490Included in Profit and Loss account A=(i) + (ii) 1,455.30 1,835.47Contribution to P.F. B 0.09 0.09Total A+B 1,455.39 1,835.562.11 Auditors’ Remuneration:(R in lakhs)Particulars Year ended 31.03.11 Year ended 31.03.10As Auditors:Audit Fees 13.91 13.96Tax Audit Fees 2.10 2.10Out of pocket expenses 0.22 0.16In other capacity 2.19 0.99Service Tax 1.90 1.77Total 20.31 18.982.12 Lease:Operating LeaseLease rentals in respect of assets taken on operating lease during the year ended 31st March, 2011 amounts to R 5.03 lakhs(Previous Year : R 18.87 lakhs).a) Future obligations towards lease rentals under the lease agreements as on 31st March, 2011 amounts to R NIL (PreviousYear : R 5.03 lakhs) Details of lease rentals payable within one year and thereafter are as under:-(R in lakhs)Particulars 2010-11 2009-10Within one year NIL 5.03Later than one year and not later than five year NIL NILLater than five years NIL NILFuture obligations are before recovery of expenses.b) General Description of lease terms: -i) Lease rentals are charged on the basis of agreed terms.ii) Assets are taken on lease for a period of 3 years.Immovable Properties taken on lease:The Company has entered into lease / license agreements in respect of immovable properties with different parties. Certainsuch agreements contain escalation clause related to lease rentals / license fees from 5 % to 20 % p.a.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 107

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)2.13 Basic & Diluted Earnings per share:(R in lakhs)ParticularsYear ended31-Mar-11Year ended31-Mar-10Net Profit attributable to equity shareholders after minority interests [A] (R) 13,706.03 17,044.66Weighted Number of equity shares for Basic EPS Face Value R 1 each [B] 143,920,076 143,100,882Weighted Number of equity shares outstanding for Diluted EPS Face ValueR 1 each [C] 143,961,260 143,249,755Basic Earnings per share (EPS) after minority interests (R) [A/B] 9.52 11.91Diluted Earnings per share (EPS) after minority interests (R) [A/C] 9.52 11.902.14 Deferred tax Assets/(Liability) at the year-end comprise timing differences on account of:(R in lakhs)ParticularsFor the Year ended 31-Mar-11 For the Year ended 31-Mar-10Deferred Tax LiabilityDifference in Closing Net Block of fixed Assets. (152.26) (197.93)Sign-on Bonus NIL (2.00)Interest Capitalised on Capital CWIP (409.06) -Deferred Tax AssetsGratuity Provision 152.44 114.26Preliminary Expenses 2.43 3.53Provision for Doubtful & Standard Assets 30.20 21.64Loss on sale of Investments 17.28 16.49Disallowance under Section 43 B of the Income Tax Act, 1961 140.83 144.10Loss to be Carried forward under Income Tax 203.09 214.40Deferred Tax Assets / (Liability) (15.05) 314.692.15 Related Party Disclosure:I. Related Parties (as certified by management):-Enterprises in which Key Managerial Personnel exercise Significant Influence:1. Passionate Investment Management Private Limited2. Nagori Agro & Cattle Feeds Private Limited3. Rishabh Securities Private Limited4. Windwell Securities Private Limited5. Textile Exports Private Limited6. Raamdeo Agrawal (HUF)Key Management Personnel:-1. Mr. Motilal Oswal – Chairman & Managing Director2. Mr. Raamdeo Agrawal – Joint Managing Director3. Mr. Ajay Menon – Whole-time Director4. Mr. Nitin Rakesh – Chief Executive Officer & Managing Director5. Mr. Harsh Joshi – Whole-time DirectorRelatives of Key Management Personnel / Enterprise in which relatives of Key Management Personnel have significantinfluence:-1. Pratik M. Oswal – Son of Chairman2. Pratiksha M. Oswal – Daughter of Chairman3. P. S. Menon – Father of Whole-time Director4. Vimla Oswal – Wife of Chairman5. Suneeta Agrawal – Wife of Joint Managing Director6. Oswal Shares & Securities – Enterprises of Brother of Chairman7. Agarwal Portfolio – Enterprises of Brother of Joint Managing Director108CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)II.Related Party Transaction during the Year:Transaction Name of the related Party Enterprises in which KeyManagerial Personnelexercise Significant InfluenceKey Managerial Personnel/Relative of Key ManagerialPersonnelTotal(R in Lakhs)2010-11 2009-10 2010-11 2009-10 2010-11 2009-10Managerial Remuneration Motilal Oswal – – 762.30 841.00 762.30 841.00Raamdeo Agrawal – – 481.33 845.00 481.33 845.00Harsh Joshi – – 32.17 – 32.17 –Nitin Rakesh – – 122.50 – 122.50 –Ajay Menon – – 60.82 74.25 60.82 74.25MOAMC Employee Stock Option (In Nos) Nitin Rakesh – – 1,000,000.00 – 1,000,000.00 –MOFSL Stock Option (In Nos.) Ajay Menon – – 25,000.00 – 25,000.00 –Harsh Joshi – – 25,000.00 – 25,000.00 –Corporate Guarantees Passionate Investment Management 31,760.00 31,745.00 – – 31,760.00 31,745.00Private LimitedRent Nagori Agro & Cattle Feeds Private Limited 34.32 34.32 – – 34.32 34.32Rishabh Securities Private Limited 9.18 9.18 – – 9.18 9.18Windwell Securities Private Limited 3.06 3.06 – – 3.06 3.06Textile Exports Private Limited 15.90 15.90 – – 15.90 15.90BrokeragePassionate Investment Management (15.72) (10.51) – – (15.72) (10.51)Private LimitedAgarwal Portfolios – – 45.63 40.18 45.63 40.18Pratik M. Oswal – – (0.07) – (0.07) –Pratiksha M. Oswal – – (0.07) – (0.07) –Motilal Oswal – – (1.32) (10.10) (1.32) (10.10)Raamdeo Agrawal – – (5.10) (0.84) (5.10) (0.84)Dividend Motilal Oswal – – 284.20 197.47 284.20 197.47Raamdeo Agrawal – – 281.14 187.42 281.14 187.42Raamdeo Agrawal (HUF) – – 7.80 5.20 7.80 5.20Suneeta Agrawal – – 3.54 2.56 3.54 2.56Vimla Oswal – – 1.50 1.00 1.50 1.00Passionate Investment Management 612.00 400.00 – – 612.00 400.00Private LimitedCharges (recovered) / paid Oswal Shares & Securities – – (0.91) 0.32 (0.91) 0.32Subscription / Purchase toEquity SharesPassionate Investment ManagementPrivate LimitedPassionate Investment ManagementPrivate Limited- 10.00 – – –- 10.00– 600.00 – – – 600.00IPO Application P. S. Menon – – (5.93) – (5.93) –Personal Guarantees Motilal Oswal – – – (2,000.00) –- (2,000.00)Raamdeo Agrawal – – –- (2,000.00) –- (2,000.00)Collaterals (Market Value) Passionate Investment Management (39,305.01) (31,437.35) – – (39,305.01) (31,437.35)Private LimitedMotilal Oswal –- – (9,656.25) (12,446.25) (9,656.25) (12,446.25)Raamdeo Agrawal – – (1,287.50) (1,659.50) (1,287.50) (1,659.50)Outstanding Balances:Creditors Motilal Oswal – – – (2.23) – (2.23)Security DepositPassionate Investment Management 200.00 200.00 – – 200.00 200.00Private LimitedNote: ‘Income / receipts figures are shown in brackets.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 109

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)2.16 Segment Information:(R in lakhs)Equity Broking& Other relatedactivitiesCurrentYearPreviousYearFinancing & OtheractivitiesCurrentYearPreviousYearCurrentYearInvestmentBankingPreviousYearUnallocated Elimination TotalCurrentYearPreviousYearCurrentYearPreviousYearCurrentYearPreviousYearExternal Revenue 46,242.57 48,694.80 5,012.90 5,605.69 3,987.29 6,503.00 4,794.45 3,728.63 – – 60,037.20 64,532.12Inter Segment 2,056.69 1,435.20 71.04 (15.69) 64.50 – 98.81 67.77 (2,291.05) (1,487.28) (0.00) (0.00)RevenueTotal Revenue 48,299.26 50,130.00 5,083.94 5,590.00 4,051.79 6,503.00 4,893.26 3,796.40 (2,291.05) (1,487.28) 60,037.20 64,532.12RESULTSegment Result 14,955.42 16,450.00 4,313.86 4,895.00 1,832.48 3,217.00 523.63 1,472.00 – – 21,625.39 26,034.00Un-allocated– (5.66)expensesOperating profit 21,625.39 26,039.66Interest Expenses (551.29) (716.82)Interest Income – –Income Tax (7,123.63) (7,880.74)Profit From13,950.47 17,442.10OrdinaryActivitiesExtra Ordinary Item – –Net Profit 13,950.47 17,442.10Other InformationSegment Assets 104,763.85 99,338.26 55,102.87 55,610.67 1,810.02 2,414.07 32,303.69 32,756.54 (7,299.07) (4,669.36) 186,681.36 185,450.18Segment Liabilities 52,921.69 51,480.95 954.16 6,193.97 759.79 1,914.07 28,107.82 32,604.17 (2,012.87) (1,340.63) 80,730.59 90,852.54Capital Expenditure 3,003.47 7,669.55 3,398.85 10,587.29 9.08 18.04 22.43 (215.83) – – 6,433.83 18,059.05Depreciation 1,260.01 1,360.15 0.75 0.20 9.57 12.84 42.45 45.68 – – 1,312.78 1,418.88Non-cash expensesother thandepreciation– – 73.92 – – – – – – – 73.92 –110CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)2.17 The following table set out the consolidated gratuity plan as required under Accounting Standard 15. Reconciliation of openingand closing balances of the present value of the defined benefit obligation.(R in lakhs)Method: Unit Credit MethodAssumptionsDetailsDiscount Rate8% P.A.Expected Return On Plan AssetsN/AMortalityL.I.C. 1994-96 ULTIMATEFuture Salary Increases15% p.a.DisabilityNilAttrition20% p.a.Retirement55 yrs.Changes in the Present Value of the Obligation and in the Fair Value of the AssetsPresent Value Of obligation at the beginning of period 345.49Interest Cost 25.96Current Service Cost 161.62Past Service Cost 108.41Benefits Paid (41.88)Actuarial (gain) loss on Obligation (105.86)Present Value Of obligation at the end of period 493.75Fair value of plan Assets at the beginning of the period 0Expected Return On plan assets 0Contributions 41.88Benefits Paid (41.88)Actuarial gain (Loss) Plan Assets 0.00Fair value of plan Assets at the end of the period 0.00Total Actuarial gain (loss) to be recognised 110.47Balance Sheet RecognitionPresent Value Of Obligation 493.75Fair Value Of Plan Assets 0.00Liability (assets) 493.75Unrecognized Past Service Cost 0.00Liability (asset) recognised in the Balance Sheet 493.75Profit & Loss - ExpensesCurrent Service Cost 161.62Interest Cost 25.96Expected Return On plan assets 0.00Net Actuarial gain (loss) recognised in the year (105.86)Past Service Cost 108.41Expenses Recognised in the statement of Profit & Loss 190.14Movement in the net Liability recognised in the Balance SheetOpening net Liability 345.49Expenses 190.14Contribution (41.88)Closing Net Liability 493.75MOTILAL OSWAL FINANCIAL SERVICES LIMITED 111

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)2.18 Open Interest in Individual Stock Futures as on 31st March, 2011(a) Open Long Positions:Name of Equity Index / Stock Future Expiry Date No. of Contracts No. of UnitsABAN 28-Apr-11 11 2,750ABB 28-Apr-11 5 1,250ACC 28-Apr-11 19 4,750ALBK 28-Apr-11 16 16,000APIL 28-Apr-11 8 4,000AXISBANK 28-Apr-11 46 11,500BAJAJHIND 28-Apr-11 32 64,000BANKNIFTY 28-Apr-11 331 8,275BHARATFORG 28-Apr-11 21 21,000BHARTIARTL 28-Apr-11 78 78,000BHEL 28-Apr-11 76 9,500CENTURYTEX 28-Apr-11 49 24,500CIPLA 28-Apr-11 24 24,000DABUR 28-Apr-11 57 114,000DIVISLAB 28-Apr-11 3 1,500DLF 28-Apr-11 18 18,000DRREDDY 28-Apr-11 33 8,250ESSAROIL 28-Apr-11 4 8,000GRASIM 28-Apr-11 16 2,000HCLTECH 28-Apr-11 15 7,500HDFC 28-Apr-11 73 36,500HDFCBANK 28-Apr-11 72 9,000HEROHONDA 28-Apr-11 50 6,250HINDPETRO 28-Apr-11 55 27,500HINDUNILVR 28-Apr-11 33 33,000HINDUSTAN ZINC LTD. 28-Apr-11 2 5,000IDFC 28-Apr-11 27 54,000INFOSYSTCH 28-Apr-11 251 31,375ITC 28-Apr-11 171 342,000JINDALSTEL 28-Apr-11 41 20,500JPASSOCIAT 28-Apr-11 25 50,000KOTAKBANK 28-Apr-11 71 35,500LT 28-Apr-11 234 29,250LUPIN LIMITED 28-Apr-11 1 1,000M&M 28-Apr-11 62 31,000NCC 28-Apr-11 12 24,000NIFTY 30-Jun-11 657 32,850NTPC 28-Apr-11 68 68,000ONGC 28-Apr-11 10 10,000ORCHIDCHEM 28-Apr-11 7 14,000112CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)Name of Equity Index / Stock Future Expiry Date No. of Contracts No. of UnitsPATNI 28-Apr-11 385 192,500RCOM 28-Apr-11 26 52,000RELIANCE 28-Apr-11 322 80,500RELINFRA 28-Apr-11 56 14,000RPOWER 28-Apr-11 18 36,000SAIL 28-Apr-11 59 59,000SESAGOA 28-Apr-11 53 53,000SIEMENS 28-Apr-11 29 14,500STER 28-Apr-11 38 76,000TATAGLOBAL 28-Apr-11 5 10,000TATAMTRDVR 28-Apr-11 72 18,000TATAPOWER 28-Apr-11 15 3,750TATASTEEL 28-Apr-11 79 39,500TCS 28-Apr-11 113 28,250UNITECH 28-Apr-11 41 164,000(b) Open Short Positions:Name of Equity Index / Stock Future Expiry Date No. of Contracts No. of UnitsABGSHIP 28-Apr-11 5 5,000ADANIENT 28-Apr-11 76 38,000ALOKTEXT 28-Apr-11 1 10,000AMBUJACEM 28-Apr-11 7 14,000ANDHRABANK 28-Apr-11 10 20,000ASHOKLEY 28-Apr-11 44 176,000AUROPHARMA 28-Apr-11 144 180,000BAJAJ-AUTO 28-Apr-11 35 8,750BALRAMCHIN 28-Apr-11 7 28,000BANKBARODA 28-Apr-11 329 82,250BANKINDIA 28-Apr-11 8 4,000BGRENERGY 28-Apr-11 60 15,000BHUSANSTL 28-Apr-11 4 2,000BPCL 28-Apr-11 25 12,500CAIRN 28-Apr-11 19 19,000CANBK 28-Apr-11 82 41,000EDUCOMP 28-Apr-11 129 64,500FEDERALBNK 28-Apr-11 5 5,000GAIL 28-Apr-11 5 2,500GESHIP 28-Apr-11 76 76,000GMRINFRA 28-Apr-11 15 60,000HCC 28-Apr-11 156 624,000HDIL 28-Apr-11 93 93,000HINDALCO 28-Apr-11 76 152,000ICICIBANK 28-Apr-11 5 1,250IDBI 28-Apr-11 41 82,000MOTILAL OSWAL FINANCIAL SERVICES LIMITED 113

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)Name of Equity Index / Stock Future Expiry Date No. of Contracts No. of UnitsIFCI 28-Apr-11 20 80,000ISPATIND 28-Apr-11 16 160,000JETAIRWAYS 28-Apr-11 11 5,500JSWSTEEL 28-Apr-11 413 103,250LITL 28-Apr-11 55 220,000MARUTI 28-Apr-11 123 30,750MCDOWELL-N 28-Apr-11 256 64,000MPHASIS 28-Apr-11 10 5,000MTNL 28-Apr-11 7 28,000MUNDRAPORT 28-Apr-11 51 102,000NATIONALUM 28-Apr-11 5 10,000NEYVELILIG 28-Apr-11 2 4,000NIFTY 28-Apr-11 1300 65,000NIFTY 28-Apr-11 2541 127,050ORIENTBANK 28-Apr-11 3 1,500PANTALOONR 28-Apr-11 310 155,000PATNI 28-Apr-11 16 8,000PETRONET 28-Apr-11 2 4,000PIRHEALTH 28-Apr-11 149 74,500PNB 28-Apr-11 8 2,000POWERGRID 28-Apr-11 125 250,000RANBAXY 28-Apr-11 3 1,500RELCAPITAL 28-Apr-11 10 5,000RELMEDIA 28-Apr-11 23 23,000RENUKA 28-Apr-11 63 252,000SBIN 28-Apr-11 372 46,500SCI 28-Apr-11 41 82,000STERLINBIO 28-Apr-11 3 6,000SUNPHARMA 28-Apr-11 43 26,875SUNTV 28-Apr-11 13 6,500SUZLON 28-Apr-11 38 152,000SYNDIBANK 28-Apr-11 17 34,000TATAMOTORS 28-Apr-11 880 220,000TECHM 28-Apr-11 4 2,000TITAN 28-Apr-11 23 2,875TV-18 28-Apr-11 22 88,000TVSMOTOR 28-Apr-11 28 112,000UCOBANK 28-Apr-11 26 52,000UNIONBANK 28-Apr-11 82 82,000VIJAYABANK 28-Apr-11 9 36,000WIPRO 28-Apr-11 18 9,000YESBANK 28-Apr-11 11 11,000ZEEL 28-Apr-11 10 20,000114CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)(c) Outstanding Options Contract as on 31st March, 2011(R in lakhs)Name of Equity Index / Stock Options Total premium carried forward as at the year end net of provisions madeCAIRN 0.014NIFTY 6,213.08RELIANCE 0.010SESAGOA 0.132TOTAL 6,213.24(d) The Company pledges Stock in Trade with the Stock exchanges towards margin requirement of the exchanges.2.19 Initial margin in respect of outstanding Equity Derivative Instruments contracts at year end is R 3,632.93 lakhs (Previous YearR 4,938.75 lakhs) which comprises of bank & fixed deposits, bank guarantee & collaterals.2.20 During the year, CRISIL Limited assigned the Credit Rating of ‘P1+’ (pronounced ‘P One Plus’) to the following Debt programmes /Bank loan facilities of the company :-a. Short Term Debt Programme of R 80,000 lakhs.b. Bank guarantee facilities of R 46,800 lakhsc. Short Term Loan facility of R 20,800 lakhs2.21 Out of the capital commitment of 10% (subject to maximum limit of R 4,500 lakhs) given by the Company in respect of totalcapital commitment of Business Excellence Trust, the Trust sponsored by the Company under the Indian Trust Act, 1982,the Company has contributed an amount of R 4,050 lakhs towards its capital contribution as per the draw down intimationsreceived from the Fund & an advance of R 3,375 in thousands against future draw down.2.22 During the year, the Company has given total capital commitment of R 2,500 lakhs in respect of Business Excellence Trust II,the Trust sponsored by the Company under the Indian Trust Act, 1982.2.23 Company has given a capital commitment of an amount of R 1,500 lakhs to India Realty Excellence Fund launched by RealityExcellence Trust. In respect of this, the Company has contributed an amount of R 900 lakhs as per the draw down intimationsreceived from the Fund & an advance of R 1,000 in thousands against future draw down.2.24 During the year, the Company has given total capital commitment of R 2,500 lakhs to India Realty Excellence Fund II launchedby Reality Excellence Trust.2.25 The Company has given a capital commitment of R 150 lakhs to Aditya Birla Private Equity & R 150 lakhs to Reliance AlternativeInvestment Fund. In respect of this, the Company has contributed an amount of R 60 lakhs in Aditya Birla Private Equity &R 52.50 lakhs in Reliance Alternative Investment Fund as per the draw down intimations received from the Fund.2.26 Estimated amount of contracts remaining to be executed on Capital Account and not provided for (Net of advances) isR 5,469.07 lakhs (Previous Year R 849.22 lakhs).2.27 The Company has, during the year, capitalized interest of R 680.35 lakhs (Previous Year R 580.31 lakhs) attributed to capitalwork-in-progress, which is in accordance with Accounting Standard on ‘Borrowing Costs’ (AS-16) issued by the Institute ofChartered Accountants of India. The said Accounting Standard specifies that interest on funds that are borrowed generally(for working capital) and used for the purpose of obtaining a qualifying asset are costs that are eligible for capitalisation. Theamount of borrowing costs (interest) attributable to the qualifying asset is determined by applying the weighted average rate ofborrowings outstanding to the asset expenditures (‘qualifying assets’).2.28 Exceptional Items:Exceptional items comprises of reversal of provision for R NIL lakhs (Previous Year R 5.66 lakhs) made in earlier year in respectof diminution in value of long-term investments.MOTILAL OSWAL FINANCIAL SERVICES LIMITED 115

SCHEDULESSchedule V : Significant Accounting Policies & Notes to Accounts for the year ended March 31, 2011 (contd..)2.29 Amount of margin money and shares received from clients and outstanding as on 31st March, 2011 are as follows:(R in lakhs)Security Settlement for theYear endedIn the form of Securities atmarket Value*Bank GuaranteesReceived in cheques31.03.2011 29,586.24 150.00 5,086.24*Margin money received in the form of securities from clients, as per the Regulations, is held by the Company. Out of this,securities worth R 9,288.88 lakhs is pledge with Exchange as on March 31, 2011.2.30 Figures of previous years have been re-grouped / re-arranged / restated wherever considered necessary.For and on behalf of the Board ofMOTILAL OSWAL FINANCIAL SERVICES LTD.Place : MumbaiDated : 30th April, 2011Samrat Sanyal Motilal Oswal Raamdeo AgrawalCompany Secretary Chairman & Managing Director Joint Managing Director116CONSOLIDATED FINANCIAL STATEMENT 2010 - 2011

FINANCIAL HIGHLIGHTS OF SUBSIDIARIES FOR THE YEAR ENDED 31ST MARCH, 2011(As per Circular No. 2/2011 dated 8th February, 2011 issued by Ministry of Corporate Affairs)Name of the SubsidiaryCompanyCapital(includingPreferenceShare Capital)Reserve &SurplusTotalAssetsTotalLiabilitiesDetails ofInvestments(excludingInvestments inSubsidiaries )GrossTurnoverProfit BeforeTaxProvisionfor TaxProfit AfterTax(R in Lakhs)ProposedDividend &tax thereonMotilal Oswal Securities Ltd. 131.88 55,412.76 123,403.38 123,403.38 221.43 48,710.57 14,896.22 4,816.05 10,080.17 1,272.21Motilal Oswal Commodities 41.00 463.44 2,491.76 2,491.76 – 963.10 377.61 123.86 253.75 –Broker Private Ltd.Motilal Oswal Investment 100.00 1,577.13 5,832.30 5,832.30 112.50 4,175.33 1,955.28 656.69 1,298.60 1,220.34Advisors Private Ltd.Motilal Oswal Private Equity 5.88 762.47 1,332.35 1,332.35 600.00 1,275.31 334.10 106.78 227.31 –Advisors Private Ltd.Motilal Oswal Capital125.00 13.86 148.40 148.40 – 96.20 59.33 20.50 38.83 –Markets Private Ltd.Antop Traders Private Ltd. 1.50 96.78 403.41 403.41 – 64.27 458.68 11.23 34.64 –Motilal Oswal Insurance 100.00 (39.93) 100.91 100.91 – 2.66 (16.84) – (16.84) –Brokers Private Ltd.Motilal Oswal Asset3,000.00 (1,303.32) 3,653.29 3,653.29 – 1,954.58 (854.69) – (854.69) –Management Company Ltd.Motilal Oswal TrusteeCompany Ltd.10.00 (1.27) 10.14 10.14 – 2.38 (0.14) – (0.14) –For and on behalf of the Board ofMOTILAL OSWAL FINANCIAL SERVICES LTD.Place : MumbaiDated : 30th April, 2011Samrat Sanyal Motilal Oswal Raamdeo AgrawalCompany Secretary Chairman & Managing Director Joint Managing DirectorMOTILAL OSWAL FINANCIAL SERVICES LIMITED 117

IMPORTANT NOTIFICATION FOR MEMBERSThe Ministry of Corporate Affairs (“MCA”) has taken a “Green Initiative in the Corporate Governance” by allowing paperlesscompliance by companies and has issued Circulars No.17/2011 dated April 21, 2011 and 18/2011 dated April 29, 2011.The Circulars provide that a company will be in compliance with the provisions of Sections 53 and 219 of the Companies Act,1956, in case documents like notices, annual report, etc. are sent in electronic mode to its members.In view of the above, we propose to send henceforth the documents like the notices, annual report, etc. in electronic form, tothe email address of the respective members.To support this green initiative of the Government in full measure, members who have not registered their e-mail addresses,so far, are requested to register their e-mail addresses in the following manner:1. In respect of electronic holdings with the Depository through their concerned Depository Participants.2. Members who hold shares in physical form are requested to mail your e-mail record to investors@motilaloswal.comquoting your name and folio number.This initiative would enable the members receive communication promptly besides paving way for reduction in paperconsumption and wastage. You would appreciate the “Green Initiative” taken by MCA and your Company’s desire to participatein the initiative.118FINANCIAL STATEMENT 2010 - 2011

Notes

Notes

Financial ServicesRegd. Office: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai 400 064. Tel.: 022 30801000